Contractual Liability of Principal and Agent Flashcards
What is actual authority?
actual authority exist when the agent reasonably believes, in accordance with the principal’s manifestations to the agent,
that the principal wishes the agent to act
What are the two main types of actual authority?
actual authority can be expressed or implied
What is express authority?
Express actual authority is when the principal has explicitly told the agent (either orally or in writing) that he is entitled to act
What is implied actual authority?
-Is implied actual authority when the agent believes he is entitled to act because the action is reasonably necessary to carry out
his authorized duties;
-or when the agent has acted similarly in prior dealings between the principal and agent
-it also exists when it is customary for agents in that position to act in that way
-an agent had actual authority to act in accordance with his reasonable understanding of his authority – even if the principal later establishes that the agent was mistaken?
-silence or prior acquiescence by the principal may give rise to the agent’s reasonable belief that he has authority to perform
similar acts in the future
If an agent acts within his scope of authority, who will be bound in third party contracts?
-the principal will be liable to a third-party on the contract even if he is undisclosed, partially disclosed, or unidentified
When does apparent authority exists?
apparent authority exist when (1) a third-party reasonably believes that the agent has authority to act on behalf of the principal, and (2) that belief is traceable to the principal’s manifestations
When does a principal hold an agent out as having authority?
(1) he gave the agent a position or title indicating certain authority, (2) he has previously held the agent out as having authority and has not published a revocation of this authority, and (3) he has cloaked the agent with the appearance of authority; a principal may be liable for a contract even if the agent acted on his own behalf or in violation of specific instruction
When will a principal not be bound to a contract?
-a principal will not be liable for a contract when the third party had notice that the agent was exceeding his authority and a principal will not be bound to a contract if the contract/transaction was not within ordinary usages of business
When is there no apparent authority?
there no apparent authority if the third-party has actual knowledge that the agent did not have authority
When does a third party have a duty to make further inquiry?
a third party has a duty to make further inquiry when the situation suggests that it may be unreasonable to believe that
the agent has authority
How is apparent authority impacted when there is a partially disclosed or disclosed but unidentified principal?
an apparent authority still exist even when the principal is partially disclosed or unidentified
What happens to apparent authority when the principal is undisclosed?
-there no apparent authority when there is an undisclosed principal because the third party does not know there is a principal
What is inherent agency power also called?
inherent agency power also called inherent authority
Under the Second Restatement of Agency, what is inherent authority?
inherent authority protects third parties when dealing with agents – even if there is no actual or apparent authority
Where does the inherent authority come from?
-derives solely from the creation of the agency relationship?
-Does this mean that inherent authority is not derived from actual authority, apparent authority, or estoppel because it flows
from the creation of the agency relationship?
-Does the inherent authority exist for the protection of persons harmed by or dealing with an agent?
