Restatement of the Law, Agency 3rd Sec. 6 Flashcards
Agent for Disclosed Principal
§ 6.01 Agent for Disclosed Principal
When an agent acting with actual or apparent authority makes a contract on behalf of a disclosed principal,
(1) the principal and the third party are parties to the contract; and
(2) the agent is not a party to the contract unless the agent and third party agree otherwise.
Agent for Unidentified Principal
§ 6.02 Agent for Unidentified Principal
When an agent acting with actual or apparent authority makes a contract on behalf of an unidentified principal,
(1) the principal and the third party are parties to the contract; and
(2) the agent is a party to the contract unless the agent and the third party agree otherwise.
Agent for Undisclosed Principal
§ 6.03 Agent for Undisclosed Principal
When an agent acting with actual authority makes a contract on behalf of an undisclosed principal,
(1) unless excluded by the contract, the principal is a party to the contract;
(2) the agent and the third party are parties to the contract; and
(3) the principal, if a party to the contract, and the third party have the same rights, liabilities, and defenses against each other as if the principal made the contract personally, subject to §§ 6.05- 6.09.
Principal Does Not Exist or Lacks Capacity
§ 6.04 Principal Does Not Exist or Lacks Capacity
Unless the third party agrees otherwise, a person who makes a contract with a third party purportedly as an agent on behalf of a principal becomes a party to the contract if the purported agent knows or has reason to know that the purported principal does not exist or lacks capacity to be a party to a contract.
Contract That is Unauthorized in Part or That Combines Orders of Several Principals
§ 6.05 Contract That is Unauthorized in Part or That Combines Orders of Several Principals
(1) If an agent makes a contract with a third party that differs from the contract that the agent had actual or apparent authority to make only in an amount or by the inclusion or exclusion of a separable part, the principal is subject to liability to the third party to the extent of the contract that the agent had actual or apparent authority to make if
(a) the third party seasonably makes a manifestation to the principal of willingness to be bound; and
(b) the principal has not changed position in reasonable reliance on the belief that no contract bound the principal and the third party.
(2) Two or more principals may authorize the same agent to make separate contracts for them. If the agent makes a single contract with a third party on the principals’ behalves that combines the principals’ separate orders or interests and calls for a single performance by the third party,
(a) if the agent purports to make the combined contract on behalf of disclosed principals, the agent is subject to liability to the third party for breach of the agent’s warranty of authority as stated in § 6.10, unless the separate principals are bound by the combined contract;
(b) if the principals are unidentified or undisclosed, the third party and the agent are the only parties to the combined contract; and
(c) unless the agent acted with actual or apparent authority to bind each of the principals to the combined contract,
(i) subject to (1), none of the separate principals is subject to liability on the combined contract; and
(ii) the third party is not subject to liability on the combined contract to any of the separate principals.
Setoff
§ 6.06 Setoff
(1) When an agent makes a contract on behalf of a disclosed or unidentified principal, unless the principal and the third party agree otherwise,
(a) the third party may not set off any amount that the agent independently owes the third party against an amount the third party owes the principal under the contract; and
(b) the principal may not set off any amount that the third party independently owes the agent against an amount the principal owes the third party under the contract.
(2) When an agent makes a contract on behalf of an undisclosed principal,
(a) the third party may set off
(i) any amount that the agent independently owed the third party at the time the agent made the contract and
(ii) any amount that the agent thereafter independently comes to owe the third party until the third party has notice that the agent acts on behalf of a principal against an amount the third party owes the principal under the contract;
(b) after the third party has notice that the agent acts on behalf of a principal, the third party may not set off any amount that the agent thereafter independently comes to owe the third party against an amount the third party owes the principal under the contract unless the principal consents; and
(c) the principal may not set off any amount that the third party independently owes the agent against an amount that the principal owes the third party under the contract, unless the principal and the third party agree otherwise.
(3) Unless otherwise agreed, an agent who is a party to a contract may not set off any amount that the principal independently owes the agent against an amount that the agent owes the third party under the contract. However, with the principal’s consent, the agent may set off any amount that the principal could set off against an amount that the principal owes the third party under the contract.
Settlement with Agent by Principal or Third Party
§ 6.07 Settlement with Agent by Principal or Third Party
(1) A principal’s payment to or settlement of accounts with an agent discharges the principal’s liability to a third party with whom the agent has made a contract on the principal’s behalf only when the principal acts in reasonable reliance on a manifestation by the third party, not induced by misrepresentation by the agent, that the agent has settled the account with the third party.
(2) A third party’s payment to or settlement of accounts with an agent discharges the third party’s liability to the principal if the agent acts with actual or apparent authority in accepting the payment or settlement.
(3) When an agent has made a contract on behalf of an undisclosed principal,
(a) until the third party has notice of the principal’s existence, the third party’s payment to or settlement of accounts with the agent discharges the third party’s liability to the principal;
(b) after the third party has notice of the principal’s existence, the third party’s payment to or settlement of accounts with the agent discharges the third party’s liability to the principal if the agent acts with actual or apparent authority in accepting the payment or settlement; and
(c) after receiving notice of the principal’s existence, the third party may demand reasonable proof of the principal’s identity and relationship to the agent. Until such proof is received, the third party’s payment to or settlement of accounts in good faith with the agent discharges the third party’s liability to the principal.
Other Subsequent Dealings Between Third Party and Agent
§ 6.08 Other Subsequent Dealings Between Third Party and Agent
(1) When an agent has made a contract with a third party on behalf of a disclosed or unidentified principal, subsequent dealings between the agent and the third party may increase or diminish the principal’s rights or liabilities to the third party if the agent acts with actual or apparent authority or the principal ratifies the agent’s action.
(2) When an agent has made a contract with a third party on behalf of an undisclosed principal,
(a) until the third party has notice of the principal’s existence, subsequent dealings between the third party and the agent may increase or diminish the rights or liabilities of the principal to the third party if the agent acts with actual authority, or the principal ratifies the agent’s action; and
(b) after the third party has notice of the principal’s existence, subsequent dealings between the third party and the agent may increase or diminish the principal’s rights or liabilities to the third party if the agent acts with actual or apparent authority or the principal ratifies the agent’s action.
Effect of Judgment Against Agent or Principal
§ 6.09 Effect of Judgment Against Agent or Principal
When an agent has made a contract with a third party on behalf of a principal, unless the contract provides otherwise,
(1) the liability, if any, of the principal or the agent to the third party is not discharged if the third party obtains a judgment against the other; and
(2) the liability, if any, of the principal or the agent to the third party is discharged to the extent a judgment against the other is satisfied.
Agent’s Implied Warranty of Authority
§ 6.10 Agent’s Implied Warranty of Authority
A person who purports to make a contract, representation, or conveyance to or with a third party on behalf of another person, lacking power to bind that person, gives an implied warranty of authority to the third party and is subject to liability to the third party for damages for loss caused by breach of that warranty, including loss of the benefit expected from performance by the principal, unless
(1) the principal or purported principal ratifies the act as stated in § 4.01; or
(2) the person who purports to make the contract, representation, or conveyance gives notice to the third party that no warranty of authority is given; or
(3) the third party knows that the person who purports to make the contract, representation, or conveyance acts without actual authority.
Agent’s Representations
§ 6.11 Agent’s Representations
(1) When an agent for a disclosed or unidentified principal makes a false representation about the agent’s authority to a third party, the principal is not subject to liability unless the agent acted with actual or apparent authority in making the representation and the third party does not have notice that the agent’s representation is false.
(2) A representation by an agent made incident to a contract or conveyance is attributed to a disclosed or unidentified principal as if the principal made the representation directly when the agent had actual or apparent authority to make the contract or conveyance unless the third party knew or had reason to know that the representation was untrue or that the agent acted without actual authority in making it.
(3) A representation by an agent made incident to a contract or conveyance is attributed to an undisclosed principal as if the principal made the representation directly when
(a) the agent acted with actual authority in making the representation, or
(b) the agent acted without actual authority in making the representation but had actual authority to make true representations about the same matter.
The agent’s representation is not attributed to the principal when the third party knew or had reason to know it was untrue.
(4) When an agent who makes a contract or conveyance on behalf of an undisclosed principal falsely represents to the third party that the agent does not act on behalf of a principal, the third party may avoid the contract or conveyance if the principal or agent had notice that the third party would not have dealt with the principal.
