Agency: Third Parties Flashcards
Principal’s Liability in Contract
An agent with authority can bind a principal to a contract.
What can an Agent do with Actual Authority?
Take action designated or implied in the principal’s manifestations to the agent, and any acts necessary or incidental to achieving the principal’s objectives.
When does an Agent Act with Actual Authority
An agent acts with actual authority when the agent reasonably believes that the principal’s wishes the agent to so act.
When does and Agent have Apparent Authority?
When a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations
(Note: What matters here: 3rd party’s belief, NOT the agent’s belief as in actual authority)
Principal’s Liability under Apparent Authority
Apparent authority may be the basis for contract liability where an agent acts beyond the scope of their actual authority or even where there is not a true agency relationship
Undisclosed Principal Liability
UPL(1):
1. Undisclosed principal
2. 3rd party induced to make detrimental change
3. Acting on principal’s behalf
4. Principal has notice
UPL (2):
1. Undisclosed principal
2. Cannot rely on instructions that reduce agent authority
3. To less than agent would have if principal disclosed.
Three Kinds of Principals
Disclosed Principal
■ A principal is disclosed if the 3rd party has notice that the agent is acting for a principal and has notice of the principal’s identity.
Undisclosed Principal
■ A principal is undisclosed if the 3rd party has no notice that the agent is acting for a principal.
Unidentified Principal
■ A principal is unidentified if the 3rd party has notice that the agent is acting for a principal but doesn’t have notice of the principal’s identity
Ratification
A person may ratify an act if the actor acted or claimed to act as an agent on the person’s behalf.
A ratification of a transaction is only effective if it PRECEDES any adverse and inequitable effects on the rights of third parties.
Examples of when ratification is not effective:
(1) Any manifestation of intention to withdraw from the transaction made by the third party;
(2) any material change in circumstances that would make it inequitable to bind the third party, unless the third party chooses to be bound
Estoppel
A principal who has not made a manifestation that an actor has authority as an agent AND who is not otherwise liable as a party to a transaction:
Is subject to liability to a third party who justifiably is induced to make a detrimental change in position b/c the transaction is believed to be on the person’s account if:
(1) the person intentionally or carelessly caused such belief, or
(2) having notice of such belief and that it might induce others to change their positions, the person did not take reasonable steps to notify them of the facts
Principal’s Direct Liability for Agent’s Torts
Direct Liability
(1) Agent acts with actual authority to commit tort or Principal ratifies A’s conduct
● Ex: Smithers told by Burns to destroy Lisa’s saxophone.
(2) Principal is negligent in selecting, supervising, or otherwise controlling Agent
(3) Activity contracted for is inherently dangerous
● E.g,, demolition, blasting
When is a Principal Vicariously Liable for Agent’s Torts?
(1) Agent is an employee who commits a tort while acting within the scope of employment
(2) Agent commits a tort when acting with apparent authority in dealing with Third Party on or purportedly on behalf of Principal.
Determining Scope of Employment
An employee acts within the scope of employment when performing work assigned by the employer or engaging in a course of conduct subject to the employer’s control.
An employee’s act is NOT within the scope of employment when it occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer.
Conduct within scope:
(1) The kind employed to perform;
(2) substantially within authorized time and space limits;
(3) at least in part to serve master; and
(4) if force used not unexpected by master
Determining “Employee” Status
An agent is an “employee” for purposes of vicarious liability if: (1) the principal controls or has the right to control the manner and means by which the agent performs his or her duties, and (2) the fact that work is performed gratuitously does not relieve a principal of liability
ABC Test
Presumes all workers are employees for state law purposes, unless:
(a) workers free from control or direction both under contract and in fact;
(b) performs work outside the usual course of hiring entity’s business;
(c) engaged in an independently established trade, occupation, or business
“Foreseeability” Test
Test to determine whether the employee was within the scope of their employment:
Whether the employee’s conduct should fairly have been foreseen from the nature of the employment or whether the risk of such conduct was typical or incidental to the employer’s enterprise.
