Power of Agent to Bind Principal

Question 1

Authority of Agent to Bind Principal

Answer 1

An agent may bind a principal to a contract if the agent is acting within his actual or apparent authority or inherent agency power.
Once a principal is validly bound to a contract by his agent, the principal is liable under the terms if the contract

Question 2

actual authority

Answer 2

An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent to act

Question 3

Actual express authority

Answer 3

Actual express authority exists when the agent believes, based on a reasonable interpretation of the principal’s words or conduct, that the principal wishes the agent to act on the principal behalf

Question 4

Actual express authority

Answer 4

Actual express authority exists when the principal directs the agent to engage in the precise task in question

Question 5

Apparent authority

Answer 5

An agent has apparent authority when:

(1) the principal holds the agent out as having authority to act on the principal’s behalf; AND
(2) The principal’s conduct, when reasonably interpreted, causes a third party to rely on the agent’s appearance if authority when dealing with the agent

Apparent authority dies NOT exists if the third party has knowledge that the agent does not have actual authority

Question 6

Inherent Agency power

Answer 6

Pursuant to equitable considerations, the inherent agency power allows courts to hold a principal liable for damages to third parties even when the principal’s agent acted WITHOUT actual or apparent authority. Courts apply the inherent agency power when

(1) An agency relationship exists; AND
(2) The totality of circumstances weighs against forcing the third party to absorb all of the damages

Question 7

how does a principal hold out an agent as having authority?

Answer 7

A principal holds an agent out as having authority when he:

(a) gives the agent a position or title indicating certain authority
(b) has previously held the agent out as having authority and has not published a revocation of said authority
(c) has cloaked the agent with the appearance of such authority

Question 8

when will a principal not be bound by a contract?

Answer 8

A principal will be bound to a contract even if the agent acted on his own behalf or in violation of specific instructions UNLESS the third party had notice the agent was exceeding his authority

Question 9

unidentified/partially Disclosed Principal

Answer 9

Apparent authority MAY exist when the principal is partially disclosed or unidentified

Question 10

Undisclosed Principal

Answer 10

Apparent Authority CANNOT exist when there is an undisclosed principal