Liability of Principal and Agent to 3rd party

Question 1

What are the two kinds of actual authority?

Answer 1

Express and Implied

Question 2

Define

Express Actual Authority

Answer 2

1) oral or written words
2) clear, direct, and definite language
3) specific detailed instructions

Question 3

What is Intent and Dissent when contemplating express actual authority?

Answer 3

Intent - P’s manifestation must cause A to believe that A is doing what P wants (subjective standard) and A’s belief must be reasonable (Objective Standard)

Dissent - P must give clear notice if P disagrees with A’s actions

Question 4

Define

Implied actual authority

Answer 4

allows A to take whatever actions are properly necessary to achieve P’s objectives

Question 5

What is the standard for A’s belief under implied actual authority?

Answer 5

implied actual authority must be based on A’s reasonable understanding of the manifestations and objective’s of P

Question 6

Define

Custom (as used for implied actual authority)

Answer 6

absent contrary instructions, A has imlied authority to act within accepted business customs or general trade usage within an industry

Question 7

Define

Acquiescence (as used for implied actual authority)

Answer 7

implied by P’s acceptance of A’s act or P’s failure to object to unauthorized actions of A that affirm A’s belief regarding P’s objectives and support A’s perceived authority to act in the future

Question 8

Can express or implied actual authority be delegated?

Answer 8

Generally, A is prohibited from delegating express or implied actual authority to a 3rd party without P’s consent

Question 9

Define

Apparent Authority

Answer 9

third party believes that a level of authority has been placed by P to A

Question 10

What can a 3rd party’s reasonable belief as to apparent authority be based on?

Answer 10

1) past dealings between P and A
2) Trade customs
3) relevant industry standards
4) P’s written statements of authority
5) Transactions that do not benefit P
6) Extraordinary transactions for P

Question 11

Can an Agent’s position create apparent authority?

Answer 11

Yes, for example being a VP or GM would likely grant apparent authority

Question 12

Who may revoke or renounce an agency relationship and when is it effective?

Answer 12

Either party can revoke or renounce
Effective as soon as either party gives notice to the other

Question 13

Can an agency be terminated by mutual agreement?

Answer 13

Yes

Question 14

What two ways can agency be terminated by agreement?

Answer 14

1) mutually agree to terminate
2) the occurance of specified circumstances in an agreement

Question 15

When do changes in circumstances terminate an agency relationship?

Answer 15

When they cause A to reasonably believe that P no longer consents to A acting on P’s behalf

Change of law, insolvency, dramatic change in business conditions, destruction of subject matter, or disaster

Question 16

Can a passage of time terminate an agency relationship? How?

Answer 16

Yes. If a reasonable period of time has passed.

Question 17

How does P’s death or suspension of P’s power terminate an agency relationship?

Answer 17

It is NOT automatic. The modern trend is A’s actual authority would terminate upon notice to Agent

Question 18

What kind of authority terminates upon P’s loss of capacity?

Answer 18

Modern trend is A’s actual authority terminates upon notice

Question 19

How does A’s death or suspension of powers terminate the Agency relationship?

Answer 19

Agency terminates immediately upon A’s death or suspension of power

Question 20

Define

Estoppel

Answer 20

applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for P and P failed to take reasonable steps and use ordinary care

Question 21

Define

Ratification

Answer 21

P ratifies the entire act/transaction after A enters into something that they did not have authority to do

• P must have legal capacity
• ratification must be timely
• P must have knowledge of all material facts involved in the original act

Question 22

Define

Respondeat Superior

Answer 22

P is vicariously liable to a third party by A who is employee and who committed an act within the scope of employment

Question 23

Define

Scope of Employment

Answer 23

an employee is within the scope of employment when either (1) performing work assigned by the employer or (2) engaging in a course of conduct subject to the employer’s control

Question 24

When do employees intentional torts fall within the scope of employment

Answer 24

(1) when conduct is within the space and time limits of employment,
(2) the employee was motivated to act for the employer’s benefit, and
(3) the act was of the kind that the employee was hired to perform

Question 25

T/F Criminal conduct and personal acts may NOT fall within the scope of employment

Answer 25

FALSE

Question 26

Is commuting to work in the scope of employment

Answer 26

No

Question 27

Is travel to perform work and employer errands within the scope of employment?

Answer 27

Yes

Question 28

Define

Frolic

Answer 28

the employees personal errand involving a significant deviation from performing work is outside the scop of employment

Question 29

Define

Detour

Answer 29

travel for personal errand may be within scope of employment if it is merely a detour

Question 30

Independent contractors are not employees and thus employers are generally not vicariously liable expect when

Answer 30

• P retains control
• P hires IC for nondelegable duties
• IC has apparent authority
• P is negligent in selecting, training, or supervising IC

Question 31

How does apparent authority make a P vicariously liable?

Answer 31

if a third party reasonably believes that A acted with apparent authority and it is traceable to P’s manifestation, then P is vicariously liable for A’s tort even if the conduct does not benefit P

Question 32

Who is liable to a contract if P is disclosed?

Answer 32

Principal

3rd party must have notice of both the existence and indentity of P

Question 33

Who has contractual liability if P is partially disclosed?

Answer 33

Agent and Principal

3rd party knows of P’s existence but not identity

Question 34

Who is contractually liable when P is undisclosed?

Answer 34

both agent and principal

Question 35

A has implied warranty of authority. If A lacks power to bind P - what happens contractually?

Answer 35

there is a breach

Question 36

If A exceeds authority is A liable?

Answer 36

Likely no under the warranty of authority

Question 37

What is required for fraudulent concealment?

Answer 37

P or A must know at time of contract that the third party would not have contracted if they had known about P