Authority Flashcards
Authority- 3 Types
- Actual
- Apparent
- Inherent
Authority- General
Authority is the moving force behind agency relationships. In general, an agent can affect the legal rights of her principal only to the extent she has authority to do so.
Actual Authority
According the Restatement (2nd) of Agency, § 7, “Authority” is:
Authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him.
Everyone in the legal world (except the drafters of the Restatement (2nd) of Agency) calls this kind of authority “Actual Authority.” It focuses on the Principal’s manifestations of consent to the Agent.
Creation of Actual Authority
You look to the facts of the situation, specifically the P’s manifestation of consent from the point of view of the A, to determine if actual authority exists.
§ 26. CREATION OF AUTHORITY; GENERAL RULE
“…authority to do an act can be created by written or spoken words or other conduct of the principal which, reasonably interpreted, causes the agent to believe that the principal desires him so to act on the principal’s account.”
Reading sections 7 and 26 together that in order to create actual authority a P must write, say, or do something that the A could reasonably interpret as giving the A authority to act on the P’s behalf.
Actual Authority- Scope
- express actual authority- direct & specific authority to do some thing
- implied actual authority- authority to perform other acts that are incidental to the performance of the task that has been expressly authorized
Apparent Authority
Even without the existence of actual authority, express or implied, it is still possible that a person who to a third party appears to be authorized may have the power to affect the legal rights of the principal.
The Restatement (2nd) of Agency, § 8 provides the following definition:
Apparent authority is the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other’s manifestations to such third persons.
Creation of Apparent Authority
To determine whether apparent authority exists we look at the principal’s manifestation of consent from the point of view of the third party, as made clear in § 27 of the Restatement:
CREATION OF APPARENT AUTHORITY: GENERAL RULE
“…apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.”
Reading sections 8 and 27 together, that in order to create apparent authority a principal must write, say, or do something that the third person could reasonably interpret as giving the (apparent) agent authority to act on the principal’s behalf.
You should note that apparent authority might exist even when there is no agency relationship between the principal and the person who appears to be an agent of the principal.
Apparent Authority- Scope
Apparent authority may bind the P, even when actual authority is not there. Under the principal of a wayward agent, the P will be bound, but the A will be liable to the P.
Inherent Agency Power(Inherent Authority)
Inherent Agency Power involves situations where an agent creates liability for the principal simply because of an act done or a transaction entered into by an agent – even though the act or transaction was not actually or apparently authorized and there is no tort, contract, or restitutional theory upon which the liability can be grounded.
About fifteen states have recognized the existence of Inherent Agency Power, and no state has yet repudiated the notion. The lack of case law does, however, make fleshing out the boundaries of Inherent Agency Power a bit more difficult than was the case with actual or apparent authority.
Inherent Agency Power- Scope
The principle explaining the Inherent Agency Power cases flows from the idea that the agent possesses a special power to affect the legal rights of the principal purely by virtue of the existence of the agency relationship. Because such a power is derived solely from the agency relation it is called the “Inherent Agency Power.” Most lawyers refer to this idea as “inherent authority.”
Comments to § 8A of the Restatement 2nd of Agency:
…Partnerships and corporations, through which most of the work of the world is done today, depend for their existence upon agency principles. The rules designed to promote the interests of these enterprises are necessarily accompanied by rules to police them. It is inevitable that in doing their work, either through negligence or excess of zeal, agents will harm third persons or will deal with them in unauthorized ways. It would be unfair for an enterprise to have the benefit of the work of its agents without making it responsible to some extent for their excesses and failures to act carefully. The answer of the common law has been the creation of special agency powers or, to phrase it otherwise, the imposition of liability upon the principal because of unauthorized or negligent acts of his servants and other agents. These powers or liabilities are created by the courts primarily for the protection of third persons, either those who are harmed by the agent or those who deal with the agent…
Inherent Agency Power- Forseeability Test (not restatement)
Prof. Eisenberg- look to principal
“…Experience tells us that agents will sometimes act in violation of their instructions with perfect good faith, either because they fail to remember a certain instruction or because they believe that in a given case their principal’s objective is best served by violating the instruction. As between the principal and the third party, the principal should bear the burden if the violation is reasonably foreseeable.
The reasonable-foreseeability rationale leads to a definition: Inherent authority is authority to take an action that a reasonable person in the principal’s position should have forseen the agent would be likely to take, even though the action would be in violation of the agent’s instructions.”
Undisclosed Principals
In the undisclosed principal situation, the agent acts on the principal’s behalf but third persons dealing with the agent do not know that the agent is acting in an agency role and, of course, they do not know who the agent is acting for.
Disclosed Principals
A disclosed principal situation is where an agent is acting on a principal’s behalf and the third persons with whom the agent deals know that the agent is acting on the principal’s behalf and further, the third person knows who the principal is.
Partially Disclosed Principals
In the partially disclosed principal situation, the third person knows the agent is acting on someone else’s behalf, but does not know who the principal is.
