Liability of Principal and Agent to 3rd party Flashcards
What are the two kinds of actual authority?
Express and Implied
Define
Express Actual Authority
1) oral or written words
2) clear, direct, and definite language
3) specific detailed instructions
What is Intent and Dissent when contemplating express actual authority?
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
Define
Implied actual authority
allows A to take whatever actions are properly necessary to achieve P’s objectives
What is the standard for A’s belief under implied actual authority?
implied actual authority must be based on A’s reasonable understanding of the manifestations and objective’s of P
Define
Custom (as used for implied actual authority)
absent contrary instructions, A has imlied authority to act within accepted business customs or general trade usage within an industry
Define
Acquiescence (as used for implied actual authority)
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
Can express or implied actual authority be delegated?
Generally, A is prohibited from delegating express or implied actual authority to a 3rd party without P’s consent
Define
Apparent Authority
third party believes that a level of authority has been placed by P to A
What can a 3rd party’s reasonable belief as to apparent authority be based on?
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
Can an Agent’s position create apparent authority?
Yes, for example being a VP or GM would likely grant apparent authority
Who may revoke or renounce an agency relationship and when is it effective?
Either party can revoke or renounce
Effective as soon as either party gives notice to the other
Can an agency be terminated by mutual agreement?
Yes
What two ways can agency be terminated by agreement?
1) mutually agree to terminate
2) the occurance of specified circumstances in an agreement
When do changes in circumstances terminate an agency relationship?
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
Can a passage of time terminate an agency relationship? How?
Yes. If a reasonable period of time has passed.
How does P’s death or suspension of P’s power terminate an agency relationship?
It is NOT automatic. The modern trend is A’s actual authority would terminate upon notice to Agent
What kind of authority terminates upon P’s loss of capacity?
Modern trend is A’s actual authority terminates upon notice
How does A’s death or suspension of powers terminate the Agency relationship?
Agency terminates immediately upon A’s death or suspension of power
Define
Estoppel
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
Define
Ratification
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
Define
Respondeat Superior
P is vicariously liable to a third party by A who is employee and who committed an act within the scope of employment
Define
Scope of Employment
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
When do employees intentional torts fall within the scope of employment
(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
T/F Criminal conduct and personal acts may NOT fall within the scope of employment
FALSE
Is commuting to work in the scope of employment
No
Is travel to perform work and employer errands within the scope of employment?
Yes
Define
Frolic
the employees personal errand involving a significant deviation from performing work is outside the scop of employment
Define
Detour
travel for personal errand may be within scope of employment if it is merely a detour
Independent contractors are not employees and thus employers are generally not vicariously liable expect when
- P retains control
- P hires IC for nondelegable duties
- IC has apparent authority
- P is negligent in selecting, training, or supervising IC
How does apparent authority make a P vicariously liable?
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
Who is liable to a contract if P is disclosed?
Principal
3rd party must have notice of both the existence and indentity of P
Who has contractual liability if P is partially disclosed?
Agent and Principal
3rd party knows of P’s existence but not identity
Who is contractually liable when P is undisclosed?
both agent and principal
A has implied warranty of authority. If A lacks power to bind P - what happens contractually?
there is a breach
If A exceeds authority is A liable?
Likely no under the warranty of authority
What is required for fraudulent concealment?
P or A must know at time of contract that the third party would not have contracted if they had known about P
