Liability/ types of agencys Flashcards
A principal will be liable to the 3rd parties in contract if
his agent has authority to effect the contract
Authority may come in 4 forms:
- express actual authority
- implied actual authority
- apparent authority
- inherent authority
Express actual authority
A principal has expressly communicated to an agent, normally in spoken words or in a writing, the power to perform some act on the principal’s behalf.
one of the most important powers that a principal can confer upon an agent
the power to borrow money or to execute and deliver promissory notes
The power to borrow money or to execute and deliver promissory notes must be granted by
express terms or flow as a necessary and ineveitable consequence from the nature of the agency actually created
Power of attourney
a formal manifestation from principal to agent, as well as to third parties with whom the agent interacts, that evidences the agent’s appointment and the nature or extent of the agent’s authority
An agent has implied authority when the principal
does not expressly confer authority but the principals words or conduct, “reasonably interpreted, causes the agent to believe” that he has authority
Implied authority includes the authority to do acts that are
incidental to or reasonably necessary to achieve the principals objectives
An agent has apparent authority in dealing with a third person when the principal’s
words or conduct, reasonably interpreted, causes the 3rd person to believe that the agent has authority
One who contracts to aquire property from a third person and convey it to another is the agent of the other only if
it is agreed that he is to act primarily for the benefit of the other and not for himself
3 elements of a buyer/supplier relationship
- fixed price (most important)
- Acting in their own name and recieves title before the transferring
- Independant business
A principal will be liable to 3rd parties in contract if
his agent has authority ro effect the contract
4 types of authority
- express actual authority
- implied actual authority
- apparent authority
- inherent authority
Express Actual Authority
A principal has expressly communicated to an agent, normally in spoken words or in a writing, the power to perform some act on the principal’s behalf.
Power of attourny
a formal manifestation from principal to agent, as well as to third parties whom the agent interacts, that evidences the agent’s appointment and the nature or extent of the agent’s authority
An ageny has implied actual authority when
the principal does not expressly confer authority but the principal’s words or conduct, “reasonably interpreted, causes the agent to believe” that he has authority.
Implied actual authority includes the authority to do acts that are
incidental to or reasonably necessary to achieve the principals objectives
An agent has apparent authority in dealing with a third person when the principal’s
words or conduct “reasonably interpreted, causes the 3rd person to believe” that the agent has authority
Real world solution to lender liability - Independant director
hire someone new to be the independent director to help out the business but they have veto power
Why care about authority?
principal is liable on a contract if agent has authority
3rd parties
person agent deals with on behalf of the principal
Actual authority
principals communication reaches the agent
Express actual authority
communicated directly and explicitly from princiapl
from the principals POV
Implied/incidental actual authority
- Necessary and proper
- in a manner the agent reasonably believes the principal would have them act
Agents POV
Apparent authority
principals communication reaches 3rd party
POV of the 3rd party
done to keep unfair result from 3rd party
Actual authority
authority to do an act can be created by
- written or spoken words of the principal OR
- other conduct of the principal which
- reasonably interpreted, causes the agent to be believe that the principal desires him so to act on the principals accout
The agent acts with actual authority when, at the time of taking action that has legal consequence for the principal, the agent
reasonably believes, in accordance with the principals manifestation to the agent, that the principal wishes the agent so to act
Actual v. Express
Express: very specific or detailed
Implied: necessary and proper or reasonable interprestation
An agent has actual authority to take action …
- designated or implied in the principals manifestations to the agent
- and acts necessary or incidental to achieving the principals objectives
- as the agent reasonably understands the principals manifestations and objectives when the agent determines how to act
Unless otherwise agreed, authority to conduct a transaction includes authority to do acts which are
incidental to it, usually accompany it, or are reasonably necessary to accomplish it
Actual authority is created by a
- principals manifestation to an agent
- that, as reasonablt understood by the agent
- expresses the principals assent that the agent take action on the principals behalf
Communication of actual authority
what the agent believes
- Methods: written, oral, conduct, silence (knowledge or reasonable person would do something)
- principal can communicate to the agent directly or indirectly
- communication must reach the agent
An agent is authorized to do and to do only
- what is reasonable for him to infer that the principal desires him to do.
- In the light of the principals manifestations
- the facts as he knows or should know them at the time he acts
Actual Authority
Knowledge and Deemed Knowledge
Reasonable infrences come from:
- the principals manifestation
- facts known to agent, at the time of action
- what agent should know, at the time of action
Actual Authority
Scope is determined by a
reasonable person standard and an subjective person standard
- reasonably interpred, causes the agent to believe the principal desires him so to act on the principals account
An agents interprestation of the principals manifestations is reasonable if it reflects
- any meaning known by the agent to be ascribed by the principal
- and, in the absense of any meaning known to the agent, as a reasonable person in the agents position would interpret the manifestations in light of the context, including circumstances of which the agent has notice and the agents fiduciary duty to the principal
actual authority
An agents understanding of the principal objectives is reasonable if it accords with the
- principals manifestations and
- the infrences that a reasonable person in the agents position would draw from the circumstances creating the agency
