Liability to Third Parties

Question 1

When is a principal bound by a contract that an agent entered into on their behalf?

Answer 1

• The principal authorized the agent to enter into the contract; and
• The agent acted with legal authority

Question 2

What are the four types of legal authority?

Answer 2

• Actual express authority
• Actual implied authority
• Apparent authority
• Ratification

Question 3

How does a principal create actual express authority?

Answer 3

By using words (written or spoken) to convey authority to the agent

Question 4

What is the requisite intent for actual express authority?

Answer 4

• Subjective: the agent must believe they’re doing what the principal wants
• Objective: the believe must be objectively reasonable

Question 5

Upon death of the principal, when does actual express authority terminate?

Answer 5

When the agent has actual knowledge of the principal’s death

Question 6

Upon death of the agent, when does actual express authority terminate?

Answer 6

Upon the death of the agent

Question 7

For actual authority, look to the communication between the _________ and the _____

Answer 7

principal; agent

Question 8

How does a principal create actual implied authority?

Answer 8

By using words (written or spoken) or other conduct to convey authority to the agent to take whatever steps are necessary to achieve the principal’s objectives

Question 9

With actual implied authority, what does the agent have authority to do?

Answer 9

To act within the accepted business custom or general trade usage

Question 10

For apparent authority, look to the communication between the _________ and the ___________

Answer 10

principal; third party

Question 11

How does a principal create apparent authority?

Answer 11

By using words (written or spoken) that cause the third party to reasonably believe that the principal consents to have acts done on the principal’s behalf by the agent

Question 12

In an agency relationship, what does ratification require?

Answer 12

• The principal has knowledge of the material terms of the contract; and
• The principal accepts the contract’s benefits

Question 13

What are the three types of principals?

Answer 13

• Disclosed
• Partially disclosed
• Undisclosed

Question 14

When is a principal disclosed?

Answer 14

The third party knows:

• The agent is acting on behalf of a principal; and
• The principal’s identity

Question 15

If the principal is disclosed, who are the parties to the contract?

Answer 15

• The third party
• The principal

Question 16

When is a principal partially disclosed?

Answer 16

The third party knows that the agent is acting on behalf of a principal, but NOT the identity of the principal

Question 17

If the principal is partially disclosed, who are the parties to the contract?

Answer 17

• The third party
• The principal
• The agent

Question 18

When is a principal undisclosed?

Answer 18

The third party does NOT know:

• The agent is acting on behalf of a principal
• The identity of the principal

Question 19

If the principal is undisclosed, who are the parties to the contract?

Answer 19

• The third party
• The agent

Note: Whether the principal is a party depends on whether the agency had authority to bind the principal to the contract

Question 20

What are the requirements for vicarious liability (respondeat superior)?

Answer 20

• Sufficient control that it’s an employer-employee relationship; and
• The agent was acting within the scope of employment

Question 21

What signals sufficient control for a employer-employee relationship?

Answer 21

The principal has control (or the right to control) the physical conduct (manner and means) of the agent’s performance

Question 22

When does a principal have vicarious liability for torts committed by an independent contractor?

Answer 22

• The task is inherently dangerous
• The principal was negligent in hiring the independent contractor
• The principal retains control over certain tasks and the tort occurs within those tasks

Question 23

What is a frolic?

Answer 23

A significant deviation from an assigned path (outside the scope of employment)

Question 24

What is a detour

Answer 24

A de minimis deviation from an assigned path (within the scope of employment)

Question 25

In general, is a principal vicariously liable for an intentional tort?

Answer 25

No, as intentional torts are outside the scope of employment

Question 26

When might a principal be vicariously liable for an intentional tort?

Answer 26

• The conduct occurred within the general space and time limits of employment
• The agent was motivated in some part to benefit the principal
• The act is of a kind that the agent was hired to perform