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17 Cards in this Set

  • Front
  • Back
What are the ways an agent may bine a principal?
1) Actual Authority

2) Apparent Authority

3) Inherent Authority

4) Ratification
What is actual authority?
The agent reasonably believes she possesses authority based on the principal's dealings w/ her.

Look to the interaction b/w the Principal and Agent
What is Apparent Authority?
Arises from the reasonable beliefs of a 3rd party.

Look at the interaction b/w the Principal and the 3rd Pary
What are some situations where the principal may be bound by apparent authority even though the agent has no actual authority?
1) Imposters

2) Lingering Apparent Authority

a) Notice may be necessary (even though terminated, an agent has apparent authority where 3rd parties with whom the principal knows the agent has dealt with in the past until they get actual or constructive notice of termination of agency)

b) Writing manifesting authority (3rd parties rely on a written authority of agency)
What happens to authority when a principal dies?
Death or termination of the principal terminates ALL AUTHORITY of the agent without notice to either the agent or third parties.

There is a limited exception for banks honoring transactions for a customer's account until it learns of the customer's death or incompetency and has a reasonable time to act.
What are situations where the principal is bound even though the agent exceeded his authority?
1) Prior act - principal previously permitted agent to exceed his authority

2) Position - a position that customarily carries certain responsibilities
What is inherent authority?
1) Respondeat superior

2) Conduct similar to that authorized.
What is the effect of ratification?
Retroactive effect unless the principal lacked contractual capacity at the time the agent entered into the unauthorized transaction

Agent is relieved of liability for breach of implied warranty of authority
What are the prerequisites of ratification?
1) The principal must know all material facts

2) Accept the entire transaction

3) Have capacity (be competent and of legal age)

- NOTE: Ratification is a unilateral act of the principal and requires no consideration
What are some methods of ratifying?
1) Express or implied through the principal's conduct

INCLUDES: Accepting the benefits of the transaction, and silence where there is a duty to disaffirm, and suing on the transaction
What is the liability to 3rd parties of a principal?
If the agent has authority to act, then the Principal is bound
What is the liaiblity of an agent to a 3rd party?
If disclosed principal, then the principal is always liable on the contract and the agent is generally NOT liable. EXCEPTION: K intended agentto be liable, implied warranty that a principal with contractual capacity exists and agent had authority to contract for principal

Where partially disclosed and undisclosed principal, both principal and agent liable. 3rd party may sue both, and upon objection must elect a party to hold liable. 3rd party may sue the agent, and if he doesn't know the principal's identity, he can later sue the principal when identity discovered if the judgment not satisfied.
What is a 3rd party's liability to a principal or agent?
If disclosed principal, then only the principal may enforce the K.

If partially disclosed and undisclosed principal, then either the principal or the agent may enforce the K

NOTE: If agent enforces the K, the principal is entitled to all of the rights and benefits thereunder
When is a principal not allowed to enforce a K?
1) There has been an affirmative fraudulent misrepresentation of the principal's identity or

2) if there is an unforeseen increased burden to the 3rd party due to the fact that performatnce is due to the principal and not the agent.
What determines whether a party is an employee or a independent contractor?
Look to the extent of control

With an employee, the principal exercises control over the job to be performed

With an independent contractor, the principal has no right to control the manner and method in which the job is performed
When is a principal liable for employee's actions?
When the act is within the scope of employment (who, what, when, where, why)
When is the principal liable for independent contractor's actions?
Activity involved was

1) inherently dangerous
2) duty nondelegable
3) principal was negligent in selecting the indep. contractor