Contract Liability - Agency Power

Question 1

When deciding whether a principal will be bound on an agent’s contract, what should first be determined?

Answer 1

If the agent had actual authority. `

Question 2

If an agent has actual authority then the P will be bound regardless of

Answer 2

whether the third party knew of the agent’s authority and the agent cannot be held liable to P for the breach because she acted within the scope of her authority.

Question 3

If the agent did not have actual authority, look to see if there was

Answer 3

apparent authority.

Question 4

Under apparent authority, the P is still bound by the K but the agent

Answer 4

may be held liable to the P for acting outside the scope of her authority.

Question 5

What is actual authority?

Answer 5

authority that the agent reasonably thinks she possesses based on the principals’ dealings with her.

Question 6

What questions should you ask when determining if there is actual authority?

Answer 6

1. Whether the requisite formalities, if any, have been complied with;
2. what type of actual authority (express or implied) is present;
3. whether the authority has been terminated.

Question 7

What are the two kinds of actual authority?

Answer 7

Express and implied.

Question 8

What is express authority?

Answer 8

that which is actually contained within the four corners of the agency agr. Effective even if it was granted mistakenly or because of misrepresentation.

Question 9

What is implied authority?

Answer 9

that which the agent reasonably believes she has as a result of the principal’s actions.

Question 10

Implied authority includes these 8 authorities:

Answer 10

1. incidental to express authority;
2. arising out of custom known to the agent;
3. resulting from prior acquiescence by the principal;
4. to take emergency measures;
5. to delegate authority in cases of ministerial acts, where circumstances require, where performance is impossible without delegation, or where delegation is customary;
6. to pay for and accept delivery of goods where there is authority to purchase;
7. to give general warranties as to fitness and quality and grant customary covenants in land sales, collect payment, and deliver where there is authority to sell; and
8. to manage investments in accordance with the “prudent investor” standard.

Question 11

If you determine that there is actual authority then you have to determine

Answer 11

if that authority has been terminated

Question 12

Termination of actual authority occurs by:

Answer 12

1. lapse of a specified or reasonable time;
2. the happening of a specified event;
3. a change in circumstances;
4. agent’s breach of fiduciary duty
5. either party’s unilateral termination
6. operation of law

Question 13

What agencies are irrevocable?

Answer 13

Agency coupled with an interest; power given as a security

Question 14

If no actual authority then you determine whether or not there is…

Answer 14

apparent authority

Question 15

What is apparent authority?

Answer 15

arises from reasonable beliefs of third parties. If a principal directly or indirectly holds out another as possessing certain authority, thereby inducing reasonable reliance by others on that authority, the person so held out has apparent authority, even though as btw himself and the principal such authority has not been granted.

Question 16

When discussing apparent authority, always ask the question:

Answer 16

What did the principle do to indicate to the third party that the agent had authority?

Question 17

What are the three types of apparent authority?

Answer 17

1. when agent has no actual authority
2. when agent exceeds bounds of actual authority
3. inherent authority (inherent agency power)

Question 18

What are situations in which the agent has no actual authority but the principal may be bound?

Answer 18

1. imposters: where the P negligently permits an imposter to be in a position to appear to have agency authority, the P will be held liable for the imposter’s actions undertaken with such authority
2. lingering apparent authority
   - notice may be necessary
   - third parties rely on writing manifesting authority
   - death or incompetency of the principal does not automatically terminate the agent’s apparent authority

Question 19

What are situations in which an agent exceeds his authority, yet the principal is still bound?

Answer 19

1. prior act (where P’s prior act previously permitted A to exceed authority and 3rd party knows this)
2. position (customarily carries with it responsibilities)

Question 20

When would an agent have apparent authority through inherent authority?

Answer 20

when court wishes to protect 3rd parties rather than P who gave some actual authority to agent -

1. respondeat superior
2. conduct similar to that authorized

Question 21

P will be held liable for the disposition of her goods by an agent possessing them if

Answer 21

agent was given some indicia of ownership, or if the goods disposed of were sold by an agent who is a dealer in the particular goods.