Twomey & Jennings BUSINESS LAW

1. Twomey & JenningsBUSINESS LAW Chapter 36 Third Persons in Agency

2. Disclosed Principal • Agent who makes a contract with a third person within the scope of authority has no personal liability on the contract. • A person purporting to act as an agent for a principal warrants by implication that there is an existing principal with legal capacity and that the principal has authorized the agent to act. • If the person acting as an agent is not authorized, he is liable for any loss caused the third person for breach of these warranties.

3. Disclosed Principal Agent Makes Contract No liability on the contract Liable Third Party Agent Liability AUTHORIZED ACTION

4. Third Party Principal Unauthorized Action Liable Principal Without Capacity Third Party Agent Unless all material facts are made known to third party Unless agreement made with third party that agent shall not be liable Agent Liability Unauthorized Action Or Principal Without Capacity

5. Partially Disclosed Principal • An agent of a partially disclosed or an undisclosed principal is a party to the contract with the third person. The agent may enforce the contract against the third person and is liable for its breach. • To avoid problems of interpretation, an agent should execute a contract “Principal, by Agent.” • Agents are liable for harm caused to third persons by their fraudulent, malicious, or negligent acts.

6. Burch v Hancock (2001) Was Burch individually liable on the contract? Undisclosed Principal • If third person is not told that a principal exists. • Third Party believes the agent is a principal and is liable on the contract.

7. Partially Disclosed Principal Undisclosed Principal Agent Makes Contract Agent Makes Contract Liable Liable Third Party Third Party Liability of Agent

8. Agents’ Signatures

9. Studebaker v Nettie’s Flower Garden (1992) Was the Defendant within the scope of employment? Liability of Principal • An undisclosed or a partially disclosed principal is liable to a third person on a simple contract made by an authorized agent. • A principal or an employer is vicariously liable under the doctrine of respondeat superior for the torts (and some crimes) of an agent or an employee committed within the scope of authority or the course of employment.

10. Bryant v Livigni (1993) Was the employer negligent in hiring Livigni? Negligent Hiring • Employer may be liable for employee’s torts because the employer was negligent in the hiring process. • This theory has been used to hold an employer liable for intentional tort. • Employer knew or should have known that the employee was violent or dangerous.

11. Haag v Bongers (1999) Was the contractor under the control of Owner? Liability for Independent Contractor’s Acts • Generally, the employer is not liable for a contractor’s injury to third persons. • Exceptions to immunity. • Work is inherently dangerous. • Owner controls the work of the contractor.

12. Liability Issues Status of Principal Authority of Agent Liability Fully Disclosed Full Authority Principal Principal Fully Disclosed No Authority Agent Principal Partially Disclosed Full Authority Agent/Principal Principal Undisclosed Principal Full Authority Agent/Principal Partially Disclosed No Authority Agent Principal Undisclosed Principal No Authority Agent

13. Sales Agents • A salesperson is ordinarily an agent whose authority is limited to soliciting offers (orders) from third persons and transmitting them to the principal. • The principal is not bound until he or she accepts the order. • The customer may withdraw an offer at any time prior to acceptance.