Agency
Two questions to consider in agency. The first question is when in the principal bound by the agent actions. The second question is when is the principal responsible for the agent’s torts.
Question 1: When is the Principal bound by their agents actions?
The principal is bound when the agent has legal authority to bind him. This happens in three situations.
Sources of Authority:
1. RST 2nd of Agency § 7: authority is the power of the agent to affect the legal relations of the principal by acts done with the principals consent
Actual authority means the principal gave it to the agent explicitly.
Examples include
Articles of Incorporation (not common)
Bylaws (commonly broad descriptions of officers’s functions and responsibilities)
Board resolutions
Implied actual authority-where the board knows of and acquiesces in an officer’s longstanding course of conduct. (This one is slightly separate from the other three and I got it from the Examples and Explanations)
Acquiescence-not always actual authority, but courts have found that if the corporation knew about the transaction, benefited from the transaction, and waited before repudiating the deal it can be found that they implicitly approved it and thus granted their authority.
2. RST 2nd of Agency § 8 – Apparent Authority
o Power of the agent to effect the legal relations of the principal by transactions with 3rd parties. 3rd party’s reasonable reliance on the authority of the agent must be based on some manifestation from the principal.
§ 2 Bases for Apparent Authority:
· where persons appear to be agents, based on a manifestation from the principal, even though no agency relationship was contemplated by the principal
· where agents act beyond the scope of their employment
§ 3rd party may rely on prior transactions – a history of dealing between the principal and the 3rd party through the agent maybe enough
§ NOTE: manifestations by the agent alone ARE NOT enough
Examples include
President: Often can bind the corporation as to matters in the usual course of business, but not to extraordinary matters, which include settling litigation, offering lifetime employment contracts, and disposing of or mortgaging all the corporation’s assets. (Menard, except they found inherent authori
Agency Power
a. Indicates a situation where the power of the agent is derived solely from the agency relation. Exists to protect people harmed in dealing with an agent.
i. DOES NOT involve traditional apparent authority
1. Has to do with the title and status of the agent
ii. Ex: used care salesman wearing a manager name tag on a dealer’s lot agrees to sell a car for well below sticker price. Buyer can rely on the status of the agent (manager) alone
Rule
R2d §161: An agent’s inherent authority subjects his principal to liability for acts done on his account which
Usually accompany or are incidental to transactions which the agent is authorized to conduct, which
If they are forbidden, the other party reasonable believes the agent is authorized to do
And has no notice that he is not so authorized
Case
