Liability of Principal for Agent’s Contracts:

Question 1

General Rule

Answer 1

Principal liable for Ks entered into by agent if principal authorized agent to enter into K.

Question 2

Types of Authority

Answer 2

Actual express

Actual Implied

Apparent

Question 3

Actual Express Authority

Answer 3

Principal used words (includes oral or private) to express authority to agent.

Revoked by unilateral act OR death or incapacity of principal, unless principal gives agent a durable power of attorney, or a written expression of authority w/ conspicuous survival language.

Question 4

Equal Dignity Doctrine

Answer 4

If K must be in writing, then express authority must be in writing.

Question 5

Actual Implied Authority

Answer 5

Authority which agent reasonably believes principal has given b/c of necessity in order to accomplish assigned task; custom; or prior dealings.

Question 6

Apparent Authority

Answer 6

Principal “cloaked” agent w/ appearance of authority AND 3rd party reasonably relies on appearance of authority.

Question 7

Secret Limiting Instruction

Answer 7

Agent has actual authority, but principal secretly limited authority, and agent goes beyond scope.

Principal still liable.

Question 8

Lingering Authority

Answer 8

Actual authority terminated, but agent continues to act on principal’s behalf.

Principal still liable until customer receives notice of termination.

Question 9

Ratification by Principal

Answer 9

Authority granted after K entered if: principal has knowledge of all material facts re: K and principal has accepted benefits.

Ratification must be complete as is. No alterations to terms.

Question 10

Extent of Liability

Answer 10

No authority → principal not liable, agent liable.

Authority → principal liable, agent not.

BUT, if principal is partially disclosed OR undisclosed, the authorized agent may be liable at election of 3rd party.