Contract Liability of Agents and Principals

Question 1

Disclosed Principal

Answer 1

A contract situation in which the third party is aware of the existence and identity of the Principal

Question 2

Disclosed Principal with Actual Authority (Express or Implied)

Answer 2

The principal is only liable to the third party.

Question 3

Disclosed Principal with Apparent Authority

Answer 3

There must ALWAYS be a disclosed principal under apparent authority because the authority exists due to the principal holding out someone as an agent

Question 4

Partially Disclosed Principal

Answer 4

Contract situation in which the third party is aware of the existence of a principal but not the principal’s identity (both the principal and the agent are liable to the third party)

Question 5

Undisclosed Principal

Answer 5

Contract situation in which the third party only knows and believes the contract is with the agent; the third party is unaware of the existence or identity of the principal (Agent is usually liable to the third party)

Question 6

Terminating Apparent Authority

Answer 6

The termination of Actual authority ends Express and Implied authority, but not Apparent authority. Direct notice must be given to any clients who believe the agent works under the principal.

Question 7

Ratifying an unauthorized contract made by an agent

Answer 7

Only fully or partially disclosed principals may ratify an unauthorized contract made by an agent.