Pg 4 Flashcards
What are the things you have to consider for contract liability when there’s an agent and principal relationship?
The type of principal that’s involved
What are the different types of principals that change contract liability when there’s an agent involved?
– disclosed principal
– partially disclosed principal
– undisclosed principal
What is a disclosed principal with regard to contact liability for agents and principles?
If the principal is disclosed at the time of the transaction, then the third party had notice that the agent was acting for the principal and knew of the principal’s identity. This is true even if he doesn’t specifically know who the principal is, but can reasonably infer his identity from the information.
What is a partially disclosed principal for contract liability?
At the time of the transaction, the third-party had noticed that the agent was or may have been acting for a principal, but he didn’t know the principal’s identity. I.e.: offering to sell goods to someone from a “well-known manufacturer“
What is an undisclosed principal with regard to contract liability?
At the time of the transaction the third-party had no notice that the agent was acting for a principal and instead thought he was dealing with the agent as the real party in interest.
What is necessary to figure out the liability that a principal owes to a third-party?
You must first figure out the type of authority that was involved: actual, apparent, inherent, estoppel, or ratification.
If an agent makes a contract for a disclosed or a partially disclosed principal, to whom is the third-party liable?
He’s liable to the principal if the agent acted with authority
If an agent makes a contract for an undisclosed principal, who is the third-party liable to?
The principal but only if the principal is not excluded by the terms of the contract, and his existence wasn’t fragile and wasn’t concealed.
What is the fraudulent concealment exception for liability from a third-party to the principal?
If an agent contracts for an undisclosed principal and falsely represents that he is acting for himself, the third-party can avoid the contract if the principal or the agent had notice that the third-party would not have dealt with the principal if he had known who he was.
If an agent knows that a third-party wouldn’t do business with the principal if he knew who he was, is a contract enforceable against the third-party?
No and the same would be true if only the principal knew that the third-party wouldn’t do business with him.
What is a situation where an undisclosed principal cannot enforce a contract?
- if his role substantially changes the third party’s rights or obligations. I.e.: if his performance isn’t effective under the contract if the third-party had substantial interest in performance from the agent who made the contract, and not the principal
- the same is true if performance for the principal would materially change the nature of the third party’s duties, increase the burden or risk to the third-party, or materially impair his chance of getting a return performance.
When would a third-party be liable to the agent?
Only if the agent becomes a party and the third-party breaches
When is an agent liable to a third-party?
– disclosed principal: no liability
– partially disclosed: he is a party to the contract because the third-party can’t depend on someone whose identity he doesn’t know, so the agent is liable
– undisclosed: since the agent represented that he was acting for himself, the agent is a party to the contract and is liable. The only way this isn’t true is if the third-party knew that the agent had no authority.
What is the evolution of corporations in the United States?
Originally the state legislatures had plenary power to create corporations through special legislative acts. A private bill would be introduced into the state legislature, considered by the committee, passed by both houses, and then signed by the governor. This system is inefficient and corrupt. Now almost any legitimate enterprise can be done in corporate form after complying with a few simple statutory formalities.
What do the laws of corporations generally deal with?
– the contents of the articles of incorporation
– the rights of shareholders
– the powers and liabilities of directors
– the rights for shareholder and director meetings
– restrictions and corporate finance
– keeping and inspecting corporate records
– authorizing organic changes through charter amendments, mergers, consolidation, and winding up
