8/23/2006
3 separate legal relationships for ALL agency problems:
Principal & 3rd party
Principal & Agent
Agent & 3rd party
3 types of principles [copy 70]
See ppt slides
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8/24/2006
If car – bus accident, then bus driver yells at car driver to move car so he can turn, then punches him.
Damages to car = vicarious liability
Damage to face = depends
Was punch to the face motivated b/c busdriver trying to fulfill job
If bus driver left and went back to fight = independent frolic
Ratification of a tort = authorizing behavior after the fact
“I’m so happy you hit that woman. She’s my enemy!”
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When does an agent have power to create/amend/breach a contract that binds principal?
What happens when agent doesn’t have power
3 sets of relationships:
Principal & 3rd party
Principal & Agent
Agent & 3rd party
Types of Principals??
(fully) Disclosed
When 3rd party knows that employee is agent of Principal
Partially disclosed/Unidentified Principal
3rd party has notice that there is a principal, but doesn’t have notice of Principal’s identity
(ie stockbroker)
Undisclosed
3rd party doesn’t know there is a Principal. They believe agent is the principal
Sec 1.01 of 3rd rstmt = definition of agency
agent has power to bind Principal when Principal has manifested assent that agent do sthg.
Objective std for manifested assent by an act
2 competing principles:
Freedom of contract
(Principal shouldn’t be bound to contract that they didn’t assent to)
Freedom of commerce
(People doing business to some extent have to be able to rely on reasonable appearances)
3rd party dealing with agents have to be able to rely on what reasonably appears like agent having authority
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8/25/2006
P. 10 in 2nd Rstmt
Ill. 4
P writes to A directing A to act as agent for sale of real property. P sends a copy of letter to T.
Does A have actual authority?
Yes -Written words expressing consent
Does A have apparent authority?
Yes
Ill. 5
P writes to A directing A to act as agent for sale of real property with a PS saying I must approve. P sends a copy of letter to T w/o PS.
Does A have actual authority?
No -Written words expressing no consent
Does A have apparent authority?
Yes.
The property is sold and P has a cause of action against A b/c A breached duty to act w/in scope of actual duty
Ill. 6
P writes to A directing A to act as agent for sale of real property. P sends a copy of letter to T. Then P telegraphs A saying, “I changed my mind. I’m revoking your authority”. A still purports to sell land to T.
Does A have actual authority?
No -Written words expressing no consent
Does A have apparent authority?
Yes.
The property is sold and P has a cause of action against A b/c A breached duty to act w/in scope of actual duty
Ill. 7
P writes to A directing A to act as agent for sale of real property. P sends a copy of letter to T. Then P telegraphs A saying, “I changed my mind. I’m revoking your authority”. A still purports to sell land to T.
Does A have actual authority?
No -Written words expressing no consent
Does A have apparent authority?
Yes.
The property is sold and P has a cause of action against A b/c A breached duty to act w/in scope of actual duty
Are oral/implicit manifestations of consent legally sufficient to create either actual or apparent authority for A to sign a contract for P
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3rd rsmt 2.06(2)
To protect T against secret limitations placed by undisclosed P to A (no warranty on hot tub), an agent has inherent authority to bind
Undisclosed P can’t put secret limitations on deal if those terms are usual/customary
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8/30/2006
Hypo1
If agent has implied actual authority then Principal is bound and ratification is not an issue
If 3rd party thinks = apparent authority
Hypo2
If P tells groundskeeper agent you don’t have authority to hire anyone, send them to me. Groundskeep sees sick tree and purports to hire tree svc to fix for $1000.
Agent does not have actual authority
3rd party: secret limitation on agent and common practice is that full-time live-in groundskeepers have authority = apparent authority
Hypo3
If highschool lawnmower kid sees tree and purports to hire tree service à no actual authority AND no apparent authority b/c unreasonable to believe a 14 yr old would have authority to hire= Ratification issue
If P sees work and tells kid & tree service, “I affirm”
Words indicating P’s election to treat the contract as binding
If P sees work and tells kid & tree service, “I disaffirm”
Rstmt 2 infers actions speak louder than words. P has knowledge of all material facts including price and watches the work being done. Accepting performance with full knowledge and retaining benefits = affirmance regardless of what you say.
KS allows for ratification by silence
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A corporation can not ratify a pre-incorporation contract by an agent b/c the corporation didn’t legally exist and also can not give actual or apparent authority.
T4, ratification is a legal impossibility of a pre-incorporation contract b/c no way to relate back
The way a corporation ratifies a pre-incorporation contract is
Either an adoption OR
A novation
HYPO5
P owns a house and wants to sell so lists with real estate agent. List for $200,000 and I won’t accept anything less.
Real estate agents can not sell a house. They can only find a buyer and receive offers and then notify seller of offers.
If agent sells house on spot for $250,000
No actual or apparent authority (not common behavior).
Hypo6
If P says, “I affirm.”
SoF caveat = If realestate transaction, agent must have written authority not just say it
Hypo7
Agent sells on Monday. T withdraws on Wednesday. P affirms on Friday. = too late. P must affirm before T withdraws
Hypo8
Agent accepts offer on Monday for $150,000 b/c months have gone by with no showings. On Wednesday house burns. P would have disaffirmed on Monday b/c wanted $200,000. P affirms on Friday for $150k = too late.
Monday was not a binding transaction. Circumstances materially changed adversely to 3d party during the interim.
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8/31/2006
Statutes p. 131 – Revised Partnership Act
P.13
Apparent authority continues until 3rd party knows
Death of Principal – durable or nondurable
Actual authority continues until agent knows
Apparent authority continues until 3rd party knows
Creditors are not Agencies
Bank not subject to mortgagor/P’s control
Bank did mortgage for its own benefit not mortgagor’s/P
Shareholder is a Principal, usually the Proxy is an Agent.
How do you make a proxy irrevocable? = create a situation in which the proxy uses a security????
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9/6/2006
303 limits rights of a partner in a partnership
Agent is a fiduciary (§101 of restmt)
Agent’s duty of loyalty to P
Care and obedience
Exercise care & reasonable skill of reasonable person in like position under similar circumstances
Act only w/in scope of actual authority
Loyalty
Account for money, property, or benefit received w/in scope of agency
“Self-dealing” contracts (agent for buyer & seller)
Competition (can’t compete against P w/o P’s consent after full disclosure of all material facts)
BUT can compete after termination
Can’t use or disclose P’s confidential information before or after termination
Covt not to compete
Agent’s Liability to 3rd party – Principal’s duty to indemnify agent
Fully disclosed principal
Agent normally not party to K (agent just a facilitator)
If agent had no power to bind P, agent liable to T for breach of implied warranty
EXCEPTION: if both A&T know P nonexistent, A liable on K
Partially disclosed principal
Agent normally a (backup) party to K
If A had actual authority & T recovers from A instead of P, P must indemnify A
If A had apparent, not actual authority & T recovers from A instead of P, A isn’t entitled to indemnification from P
If A had no power to bind P, A still liable on K to T
Undisclosed principal
Agent is party to K
If A had actual authority & T recovers from A instead of P, P must indemnify A
If A lacked authority BUT P estopped & T recovers from A instead of P, A isn’t entitled to indemnification from P
Apparent authority w/ a different name
If A had no power to bind P, A still liable on K to T
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9/7/2006
Assets – Liabilities = Net Worth à Assets = Liabilities + Net Worth
(Personal) net worth = (partnership) Personal Capital
Old form Common Law Partnerships
were not separate and distinct legal entities, just used to be a bunch of people
T4, land could not be owned in business name
Business could not sue (all partners had to act together to do stuff)
First pre-modern form
Partnerships were aggregates, not legal entities
2 main modern partne
