Liability of principal for ks entered by agents

Question 1

One test for liabilit fo principal for ks entered by agents

Answer 1

B. One test: Principal is liable for contracts enterd into by its agent only if the principal AUTHORIZED the agent to enter the k

Question 2

Types of authorization from principal to agent

Answer 2

actual express, actual implied, apparent, and ratification

Question 3

Actual express authority

Answer 3

Principal used words to express authority to agent

i. Rule: actual express authority can be oral OR private.
ii. Exception: if however, the k itself must be in writing, therefore, so to must the express authority to enter that k also be in writing.
1. i.e. anything governed by SOF—on the bar exam it will be land sales ks.
2. So basically can be oral unless it’s a land k.

iii. Express authority is revocable unlessmade durable. can be revoked by
1. Unilateral act of either principal or the agent or
2. Death or incapacity of the principal
a. If principal dies as agent is about to pay for k. Principal’s estate is not bound by the k.
3. Exception: if principal gives agent a durable power of attorney.
a. POA is written expression of authority to enter a transaction

Question 4

Actual Implied authoirty

Answer 4

i. Authority which the principal gives the agent through conduct or circumstance
1. Necessity: There is implied authority to do all tasks which are necessary to accomplish an expressly authorized tasks.
2. Custom: there is implied authority to do all tasks which by custom that are performed by persons with the agents title or position.
a. Aka “inherent” authority
b. Like title “lawyer” gives a lot of custom implied authority
3. Prior acquiescence by the principal: there is implied authority to do all tasks which the agent believes to be authorized to do from prior acquiescence by the principal.

Question 5

Radhification

Answer 5

: Authority can be granted AFTER the k has been entered if

i. Principal has knowledge of all material facts regarding the k AND
ii. Principal accepts its benefits
iii. Exception: ratification is not valid if P tries to alter the K’s terms.
iv. Hypo: Principal gives A POA only to purchase steel drums, but A enters k to purchase wooden barrels. But P tells A good job I love wooden barrels but I only need 10k. P is NOT BOUND!
1. Answer: P is liable only on its authorized ks. In this case, there was no express or implied or even apparent authority to buy wooden barrels. The power which is narrowly construed said only steel drums. So there was no actual, express or apparent authority. Nonetheless, P arguably ratified the k through knowledge and acceptance of benefits. But ratification here was not valid because P altered the contract’s terms.

Question 6

Apparent authority

Answer 6

2 part test 1) principal “cloaked” agent with the appearance of authority and 2) 3rd party reasonably relies on appearance of authority

i. Hypo: even if principal told agent not to sell certain item, principal may be bound even if the agent sells it.
1. As a rule, principal is liable on its authorized contracts. In this case, there was no actual, express or implied authority to sell the clock. However, there was apparent authority because 1) principal cloaked agent with the appearance of authority and 2) 3rd party reasonably relied on that appearance of authority

Question 7

Rules of liability on the k and exeption

Answer 7

a. General rule: the principle is liable on its authorized ks, and therefore as a rule, authorized agents are not liable on their authorized ks.
b. Exception: If there is any measure of ambiguity about the ID or existence of the principal, then watch out. This means there is an unidentified or undisclosed principal. This makes the authorized agent liable even on its authorized k, at the election of the 3rd party
i. If principal is PARTIALLY (3rd party knows there is a principal but doenst know who it is) disclosed or UNDISCLOSED (fact of principal concealed) → authorized agent may nonetheless be liable at election of 3rd party
1. 3rd party can sue both principal and agent. BUT uon objection of either ∆, 3rd party must choose prior to judgment which party he wants to hold liable.
2. If 3rd party gets judgment against agent without knowing about principal and later discovers principal, can later sue principal if judgment hasn’t been satisfied.

Question 8

3P liability to P& A

Answer 8

i. disclosed principal
1. if P disclosed, only P, not A may enforce the k and hold 3rd party liable
ii. unidentified/ undisclosed P
1. either the P or the A may enforce the k. if A enforces, P still entitled to all rights/ benefits.
iii. P may NOT enforce the k if there has been an affirmative fraudulent misrepresentation of Ps identity or if thre is a new burden on 3rd party because performance is due to P and not A.