Contractual Liability of Principal to Third Parties

Question 1

Contract Liability

Answer 1

Principal is liable for contracts that agent enters on behalf of principal when:

(1) Principal AUTHORIZED agent to enter into the contract; and
(2) Agent acted with LEGAL AUTHORITY

Question 2

Four Types of Legal Authority

Answer 2

(1) Actual Express Authority
(1) Actual Implied Authority
(3) Apparent Authority
(4) Ratification

Question 3

Exam Tip

Answer 3

When trying to discern between actual authority and apparent authority, look to the communication:

(1) When principal is communicating with agent, there is actual authority
(2) When principal is communicating with third party, there is apparent authority