Liability of P for A's Contracts

Question 1

An agent has the power to bind a P to a contract the A enters on P’s behalf only if A ____________.

Answer 1

acted with authority

Question 2

What are the 3 types of authority?

Answer 2

1) Actual
2) Apparent
3) Ratified

Question 3

What is actual authority?

Answer 3

Authority where P’s words/conduct would lead reasonable person in A’s position to believe A has authority to act on P’s behalf

Question 4

Which authority should be examined first (i.e., to see if it exists)?

Answer 4

Actual authority

Question 5

Can actual authority be express or implied?

Answer 5

Yes (either)

Question 6

What is express actual authority?

Answer 6

Authority actually contained in 4 corners of agency agreement (i.e., via words)

Question 7

What happens if express actual authority granted mistakenly or because of misrepresentation?

Answer 7

Still effective

Question 8

What is implied actual authority?

Answer 8

Authority A reasonably believes they have as a result of P’s words/actions

Question 9

How can actual authority be terminated/revoked?

Answer 9

1) happening of specified event
2) lapse of reasonable time
3) change in circumstances
4) A’s breach of fiduciary duty
5) unilateral termination by either
6) operation of law

Question 10

When is an agency relationship irrevocable?

Answer 10

When agency coupled with:
1)interest and/or
2) power given as security
IF
agency given to protect A/3P rights AND
supported by consideration

Question 10

What is apparent authority?

Answer 10

Exists when P “holds out” another as possessing authority and based on this holding out, a 3rd party reasonably led to believe authority exists (even though it doesn’t)

Question 11

How does apparent authority differ from actual authority?

Answer 11

Apparent: impact on 3P
Actual: impact on A

Question 12

What are the general types of apparent authority?

Answer 12

1) when A exceeds actual authority
2) when A has no actual authority
3) inherent authority

Question 13

When A exceeds actual authority, when can P still be bound?

Answer 13

1) prior act
2) power of position

Question 13

When A has no actual authority, when can P still be bound?

Answer 13

1) Impostors
2) Lingering apparent authority

Question 14

What is inherent authority?

Answer 14

Authority derived solely from agency relationship AND results in P being bound even though A had no authority for particular act (e.g., respondeat superior, conduct similar to authorized)

Question 15

What is ratification?

Answer 15

Created when “A” purports to act on behalf of “P” without any such authority, but P subsequently validates A’s act and becomes bound

Question 16

Ratified authority gives transaction retroactive effect unless P ______ or ___________.

Answer 16

lacked contractual capacity when A entered; retroactivity would interfere with intervening 3P rights

Question 16

What are the 3 methods for ratifying?

Answer 16

1) express ratification
2) implied ratification
3) silence (where to duty to disaffirm/suing)

Question 17

Upon ratification, A is _____ and _____.

Answer 17

relived of liability for breach of duty; implied warranty of authority

Question 18

When is P liable to 3P?

Answer 18

When valid authority

Question 18

What are the 3 requirements for ratification?

Answer 18

P must:
1) have knowledge or reason to know all material facts re K;
2) accept entire transaction; AND
3) have capacity (competency/age)

Question 19

When is A liable to 3P?

Answer 19

A generally not liable if authority exists BUT if P undisclosed OR A breaches, can be personally liable

Question 20

If P is unidentified or undisclosed, are A and/or P liable?

Answer 20

Yes; either can be

Question 21

What is the ONLY scenario in which the type of P is relevant?

Answer 21

When considering whether A liable

Question 22

When P disclosed, who can enforce K against 3P?

Answer 22

ONLY P

Question 23

When P undisclosed/unidentified, who can enforce K against 3P?

Answer 23

Either A/P

Question 24

When can P NOT enforce a K?

Answer 24

Where:
-fraudulent misrepresentation of P’s identity; OR
-unforeseen burden to 3P due to fact that performance due to P and not A