Essay - Feb 2017, Q5

Question 1

When is the principal liable for the actions of the agent?

Answer 1

A principal is not liable on a contract entered into by an agent unless the agent had actual or apparent authority.

Question 2

When do we have an agency relationship?

Answer 2

To establish an agency relationship, there must be: assent
between the parties, an intention to benefit the principal, and the principal must have
control over the agent.

Question 3

Further, in order to enter into an enforceable agreement on behalf of the principal, the agent must have authority to do so. What are the 3 types of authority.

Answer 3

express, implied, and apparent. Express authority is the authority expressly given by the principal
to the agent. Implied authority is when the agent reasonably believes that she has the authority to conduct the transactions necessary to achieve the goal given by the principal under express authority. Apparent authority is when the principal cloaks the agent in
authority by some conduct directed at a third party.

Question 4

When does apparent authority exists?

Answer 4

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