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Chapter 9 (Agents and Principals)
Terms in this set (11)
Differentiate between an agent's "actual" authority and "apparent" authority.
Actual authority (express or implied) arises from what the principal makes clear to the agent. Apparent authority, in contrast, arises from what the principal causes a third party to believe. An agent has apparent authority when the principal, by either word or action, causes a third party reasonably to believe that the agent has authority to act, even though the agent has no express or implied authority.
Differentiate between an agent's "express" authority and "implied authority"
Express authority is authority declared in clear, direct, and definite terms. Express authority can be given orally or in writing. An agent has the implied authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency. Authority can also be implied by custom or inferred from the position the agent occupies.
Describe when an agent would have emergency powers
When an unforeseen emergency demands action by the agent to protect or preserve the property and rights of the principal, but the agent is unable to communicate with the principal, the agent has emergency power.
Describe "ratification" as it pertains to a principal and agent
Ratification is the act of accepting and giving legal force to an obligation that previously was not enforceable. When ratification occurs, the principal is bound to the agent's act, and the act is treated as if it had been authorized by the principal from the outset. Ratification can be either express or implied.
Differentiate between a disclosed, partially disclosed, and undisclosed principal.
1. A: A disclosed principal is a principal whose identity is known by the third party at the time the contract is made by the agent.
2. A partially disclosed principal is a principal whose identity is not known by the third party. Nevertheless, the third party knows that the agent is or may be acting for a principal at the time the contract is made.
3. An undisclosed principal is a principal whose identity is totally unknown by the third party. In addition, the third party has no knowledge that the agent is acting in an agency capacity at the time the contract is made.
When is an agent's act considered unauthorized?
If an agent has no authority but nevertheless contracts with a third party, the principal cannot be held liable on the contract. It does not matter whether the principal was disclosed, partially disclosed, or undisclosed. The agent is liable, however.
Describe an "E-Agent"
A semiautonomous computer program that is capable of executing specific tasks on behalf of a principle. E-commerce uses e-agents to create contracts every day.
Describe when an agent or principal may be liable to a third party as it pertains to torts, crimes, and negligence.
During an unauthorized act (acts outside of the agent's express, implied, or apparent authority) the principal is not liable, but the agent is personally liable. An agent is liable to a 3rd party for his own torts, however principles may be liable for agent's torts if they result from:
• Principal's Tortious Conduct
• Principal's Authorization of Agent's Tortious Conduct
• Liability for Agent's Misrepresentation
o Apparent Implied Authority
o Innocent Misrepresentation
Define the doctrine of "respondent superior"
A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment.
How can an agency be terminated?
Agency law is similar to contract law in that both an agency and a contract may be terminated by an act of the parties or by operation of law. Once the relationship between the principal and the agent has ended, the agent no longer has the right (actual authority) to bind the principal. For an agent's apparent authority to be terminated, though, third persons may also need to be notified that the agency has been terminated.
Differentiate between termination by act and termination by operation of law
• Termination by Act of Parties
o Lapse of Time
o Purpose Achieved
o Occurrence of a Specific Event
o Mutual Agreement
o Termination by One Party
o Notice of Termination
• Termination by Operation of Law
o Death or Insanity of either Principal or Agent (automatic)
o Changed Circumstances
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