Contract Liability: Principals Flashcards
When does the agent act with actual authority?
at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.
How is actual authority created?
Created by principal’s manifestations to an agent that, as reasonably understood by the agent, expresses the principal’s assent that the agent act on the principal’s behalf.
When is agent’s understanding of principal’s manifestation reasonable?
Reflects any meaning that the agent knows from the principal is to be ascribed or if it accords with the inferences that a reasonable person in the agent’s position would draw in light of the context.
What is implied actual authority?
What a reasonable person in the agents position would understand to be reasonably included in the instructions in order to accomplish the objective.
Can be inferred from:
Words the principal use;
Custom; or
From the relations between the parties (past interactions/duties).
When does apparent authority arise?
Arises when a third party reasonably believes the actor has authority to act on behalf ot he principal and that belief is traceable to the principal’s manifestations.
When/How is apparent authority created?
Created by a person’s manifestation that another has authority to act with legal consequences or the person who makes the manifestation, when a third party reasonably believes the actor to be authorized and belief is traceable to the manifestation.
What is the effect of contracting with undisclosed principal?
The principal and the third party are parties to the contract; and
The agent is not a party to the contract unless the agent and third party agree otherwise.
What is effect of contracting with unidentified principal?
The principal and the third party are parties to the contract; and
The agent is a party to the contract unless the agent and the third party agree otherwise.
What is effect of contracting with undisclosed principal?
Unless excluded by the contract, the principal is a party to the contract; The agent and the third party are parties to the contract.
Agent acts as if they’re contracting on their own.
What is Ratification?
Doctrine that allows a person to retroactively bind themselves to a contract entered into purportedly on their behalf, even though the agent or purported agent was not acting within authority at the time they entered the contract.
How does principal ratify agent act?
Manifesting assent that the act shall affect the person’s legal relations, OR
* Expressed ratification – oral or written statements.
Conduct that justifies a reasonable assumption that the person so consents.
* Implied ratification
What is the effect of ratification?
Agent is relieved of their liability from the breach of duty.
Both parties to the contract are bound, following a valid ratification.
Ratification Changes History
* Gives the agent actual authority for something that they did not have the actual authority for prior to ratification.
When is ratification NOT effective?
Agent causes ratification by misrepresentation or other conduct that would make the contract voidable.
* Cannot lie to get ratification.
Principal ratifies to avoid a loss
Ratification that diminishes the rights or other interests of persons, not parties ot transaction that were acquired in the subject matter prior to the ratification.
* Ratification that gives third party rights, cannot ratify just to ‘mess’ with third party.
What is estoppel?
Principal or purported principal is “estopped” from disclaiming contractual liability.
o Does not create a binding contract between the parties.
o Does require showing that 3rd party detrimentally changed position in reliance on P or Purported P.
o One Way Street: 3rd party can hold P liable but does not give P any rights against 3rd party, unless P were to ratify the transaction.
When can estoppel be used for existence of agency relationship?
A person subject to liability to a third party who justifiably is induced to make a detrimental change in position because the transaction is believed to be on the person’s account if:
* 1. The person intentionally or careless caused such a 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.
