Final Exam (Chapters 37-39) Flashcards
(250 cards)
Disclosed Principal
Principal whose identity is made known by the agent as well as the fact that the agent is acting on the principal’s behalf
The third person dealing with an agent of a disclosed principal ordinarily intends to make a contract with the principal, not the agent. Consequently, the agent is not a party to, and is not bound by, the contract that is made.
“When the agent makes known the identity of the principle and the fact that the agent is acting on behalf of the principal”
Partially Disclosed Principal
Principal whose existence is made known but whose identity is not
When the agent makes known the existence of a principle but not the principal’s identity
Because the third party does not know the identity of the principal, the third person is making the contract with the agent and the agent is therefore a party the contract
Undisclosed Principal
Principal on whose behalf an agent acts without disclosing to the third person the fact of agency or the identity of the principal
When the third person is not told or does not know what the agent is acting as an agent for anyone else
In this case, the third person is making the contract with the agent and the agent is a party to that contract
Respondeat Superior
Doctrine that the principal or employers is vicariously liable for the unauthorized torts committed by an agent or employee while acting within the scope of the agency or the course of the employment respectively.
In modern times, this doctrine can be justified on the grounds that the business should pay for the harm caused in the doing of the business, that the employer will be more careful in the selection of employees if made responsible for their actions, and that the employer may obtain liability to protect against claims of third persons.
Simply:
The rule of law imposing vicarious liability on an innocent employer for the wrong of an employee
Nature of Act
The wrongful act committed by an employee may be a
- negligence act, an
- intentional act, a
- fraudulent act or a
- violation of government regulation.
It may give rise only to civil liability of the employer, or it may also subject the employer to prosecution for crime.
The rights and liabilities of the principal, the agent, and the third person with whom the agent deals are generally determined by what?
Contract law. In some cases, tort or criminal law may be applicable
Action of Authorized Agent of Disclosed Principal
If an agent makes a contract with a third person on behalf of a disclosed principal and has proper authority to do so and if the contract is executed properly, the agent has no per- sonal liability on the contract. Whether the principal performs the contract or not, the agent cannot be held liable by the third party.
In speaking of an agent’s action as authorized or unauthorized, it must be remembered that
Authorized includes action that, though originally unauthorized, was subse- quently ratified by the principal. Once there is an effective ratification, the original action of the agent is no longer treated as unauthorized
Unauthorized Action
If a person makes a contract as agent for another but lacks authority to do so, the contract does not bind the principal. When a person purports to act as agent for a principal, an implied warranty arises that that person has authority to do so. If the agent lacks author- ity, there is a breach of this warranty.
If the agent’s act causes loss to the third person, that third person may generally hold the agent liable for the loss.
The purported agent is not liable for conduct in excess of authority when the third person knows that she is acting beyond the authority given by the principal.
An agent with a written authorization may avoid liability on the implied warranty of authority by showing the written authorization to the third person and permitting the third person to determine the scope of the agent’s authority.
An agent’s liability as a party to a contract with a third person is affected by the?
Degree of disclosure
Assumption of Liability
Agents may intentionally make themselves liable on contracts with third persons. This situation frequently occurs when the agent is a well-established local brokerage house or other agency and when the principal is located out of town and is not known locally.
In some situations, the agent makes a contract that will be personally binding. If the principal is not disclosed, the agent is necessarily the other contracting party and is bound by the contract. Even when the principal is disclosed, the agent may be personally bound if it was the intention of the parties that the agent assume a personal obligation even though this was done to further the principal’s business.
Execution of Contract
A simple contract that would appear to be the contract of the agent can be shown by other evidence, if believed, to have been intended as a contract between the principal and the third party.
To avoid any question of interpretation, an agent should execute an instrument by signing the principal’s name and either by or per and the agent’s name.
If the instrument is ambiguous as to whether the agent has signed in a representative
or an individual capacity, parol evidence is admissible as between the original parties to
the transaction for establishing the character in which the agent was acting.
Torts and Crimes
Agents are liable for harm caused to third persons by the agents’ fraudulent, intentional, or negligent acts.
The fact that persons were acting as agents at the time or that they acted in good faith under the directions of a principal does not relieve them of liability if their conduct would impose liability on them when acting for themselves.
If an agent commits a crime, such as stealing from a third person or shooting a third person, the agent is liable for the crime without regard to the fact of acting as an agent. The agent is liable without regard to whether the agent acted in self-interest or sought to advance the interest of the principal.
The liability of a principal to a third person on a contract made by an agent depends on?
The extent of disclosure of the principal and the form of the contract that is executed.
Liability of Principal to Third Person
The principal is liable to the third person for the properly authorized and executed contracts of the agent and, in certain circumstances, for the agent’s unauthorized contracts.
Simple Contract with Principal Disclosed
When a disclosed principal with contractual capacity authorizes or ratifies an agent’s transaction with a third person and when the agent properly executes a contract with the third person, a binding contract exists between the principal and the third person. The principal and the third person may each sue the other in the event of a breach of the contract. The agent is not a party to the contract, is not liable for its performance, and cannot sue for its breach.
The liability of a disclosed principal to a third person is not discharged by the fact that the principal gives the agent money with which to pay the third person.
Consequently, the liability of a buyer for the purchase price of goods is not terminated by the fact that the buyer gave the buyer’s agent the purchase price to remit to the seller.
Simple Contract with Principal Partially Disclosed
A partially disclosed principal is liable for a simple contract made by an authorized agent. The third person may recover from either the agent or the principal.
Simple Contract with Principal Undisclosed
An undisclosed principal is liable for a simple contract made by an authorized agent. Although the third person initially contracted with the agent alone, the third person, on learning of the existence of the undisclosed principal, may sue that principal.
In most jurisdictions, third persons can sue and collect judgments from the agent or principal, or both, until the judgment is fully satisfied (joint and several liability).
Payment to Agent
When the third person makes payment to an authorized agent, the payment is deemed made to the principal. Even if the agent never remits or delivers the payment to the principal, the principal must give the third person full credit for the payment so long as the third person made the payment in good faith and had no reason to know that the agent would be guilty of misconduct.
Because apparent authority has the same legal effect as actual authority, a payment made to a person with apparent authority to receive the payment is deemed a payment to the apparent principal.
When a debtor makes payment to a person who is not the actual or apparent agent of the creditor, such a payment does not discharge the debt unless that person in fact pays the money to the creditor.
Agent’s Statements
A principal is bound by a statement made by an agent while transacting business within the scope of authority. This means that the principal cannot later contradict the statement of the agent and show that it is not true. Statements or declarations of an agent, in order to bind the principal, but be made at the time of performing the act to which they relate or shortly thereafter.
Agent’s Knowledge
The principal is bound by knowledge or notice of any fact that is acquired by an agent while acting within the scope of actual or apparent authority. When a fact is known to the agent of the seller, the sale is deemed made by the seller with knowledge of that fact.
The rule that the agent’s knowledge is imputed to the principals is extended in some cases to knowledge gained prior to the creation of the agency relationship. The notice and knowledge in any case must be based on reliable information. Thus, when the agent hears only rumors, the principal is not charged with notice.
If the subject matter is outside the scope of the agent’s authority then…
The agent is under no duty to inform the principal of the knowledge and the principal is not bound by it.
The principal is not charged with knowledge of an agent when
- The agent is acting adversely to the principal’s interest or
- The third party acts in collusion with the agent for the purpose of cheating the principal
Liability of Principal for Torts and Crimes of Agent
Under certain circumstances, the principal may be liable for the torts or crimes of the agent or the employee.