Liability of P for A's Contracts Flashcards
An agent has the power to bind a P to a contract the A enters on P’s behalf only if A ____________.
acted with authority
What are the 3 types of authority?
1) Actual
2) Apparent
3) Ratified
What is actual authority?
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
Which authority should be examined first (i.e., to see if it exists)?
Actual authority
Can actual authority be express or implied?
Yes (either)
What is express actual authority?
Authority actually contained in 4 corners of agency agreement (i.e., via words)
What happens if express actual authority granted mistakenly or because of misrepresentation?
Still effective
What is implied actual authority?
Authority A reasonably believes they have as a result of P’s words/actions
How can actual authority be terminated/revoked?
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
When is an agency relationship irrevocable?
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
What is apparent authority?
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)
How does apparent authority differ from actual authority?
Apparent: impact on 3P
Actual: impact on A
What are the general types of apparent authority?
1) when A exceeds actual authority
2) when A has no actual authority
3) inherent authority
When A exceeds actual authority, when can P still be bound?
1) prior act
2) power of position
When A has no actual authority, when can P still be bound?
1) Impostors
2) Lingering apparent authority
What is inherent authority?
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)
What is ratification?
Created when “A” purports to act on behalf of “P” without any such authority, but P subsequently validates A’s act and becomes bound
Ratified authority gives transaction retroactive effect unless P ______ or ___________.
lacked contractual capacity when A entered; retroactivity would interfere with intervening 3P rights
What are the 3 methods for ratifying?
1) express ratification
2) implied ratification
3) silence (where to duty to disaffirm/suing)
Upon ratification, A is _____ and _____.
relived of liability for breach of duty; implied warranty of authority
When is P liable to 3P?
When valid authority
What are the 3 requirements for ratification?
P must:
1) have knowledge or reason to know all material facts re K;
2) accept entire transaction; AND
3) have capacity (competency/age)
When is A liable to 3P?
A generally not liable if authority exists BUT if P undisclosed OR A breaches, can be personally liable
If P is unidentified or undisclosed, are A and/or P liable?
Yes; either can be
What is the ONLY scenario in which the type of P is relevant?
When considering whether A liable
When P disclosed, who can enforce K against 3P?
ONLY P
When P undisclosed/unidentified, who can enforce K against 3P?
Either A/P
When can P NOT enforce a K?
Where:
-fraudulent misrepresentation of P’s identity; OR
-unforeseen burden to 3P due to fact that performance due to P and not A
