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Chapter 32 Agency: Liability to Third Parties and Termination

Chapter 32 Agency: Liability to Third Parties and Termination. Introduction. Is Principal liable for contracts entered into by his Agent? Is Agent liable for contracts entered into for Principal? When is a third party liable to Principal and to Agent?

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Chapter 32 Agency: Liability to Third Parties and Termination

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  1. Chapter 32 Agency: Liability to Third Parties and Termination

  2. Introduction • Is Principal liable for contracts entered into by his Agent? • Is Agent liable for contracts entered into for Principal? • When is a third party liable to Principal and to Agent? • When is Principal liable for the torts of his Agent? • When is Agent liable for torts committed while working for Principal?

  3. § 1: Scope of Agent’s Authority • Principal is liable for acts entered into by Agent when she gives Agent either actual or apparent authority: • Actual Authority: express or implied. • Apparent Authority: estoppel, emergency and ratification.

  4. Express Authority • Can be oral or written. • “Equal Dignity Rule.” • If law requires written contract, Agent’s authority must be in writing. Failure to comply with the rule renders contract voidable. • Exceptions: • Officer acting for Corporation. • Agent acts in Principal’s presence. • Power of Attorney (ordinary v durable).

  5. Implied Authority • Inferred or conferred by custom, Agent’s position or what is reasonably necessary to carry out express authority. • What the Agent reasonably thinks the Principal means.

  6. Apparent Authority and Estoppel • Principal, by either word or act, causes 3rd party to reasonably believe that Agent has authority to act for Principal. • If 3rd party changes legal position by relying on Principal’s representations, Principal is estopped from denying Agent had authority to contract.

  7. Emergency Powers • Arises when: • Agent should protect Principal. • Agent cannot communicate with Principal.

  8. Ratification 1. Agent must act on behalf of Principal. 2. Principal must affirm entire deal. 3. Principal must affirm before 3rd party withdraws from transaction. 4.Principal and 3rd party must have legal capacity to contract when Agent made the deal. 5. Principals must know all the material facts involved in the transaction.

  9. §2: Liability for Contracts • Principals are classified as: • Disclosed: identity known to 3rd P. • Partially Disclosed: 3rd P knows he is dealing with Agent, but doesn’t know Principal’s identity. • Undisclosed: 3rd party does not know he is dealing with an Agent, and Principal’s identity is totally unknown.

  10. Authorized Acts • Disclosed or partially disclosed Principal is liable to 3rd party if Agent acts within scope of authority. • Agent has no liability to 3rd P for disclosed Principal’s non-performance. (Agent may be liable if Principal is partially disclosed). • Case 32.1:McBride v. Taxman Corp. (2002).

  11. Liability: Authorized Acts • If undisclosed Principal, no liability unless: • Principal expressly excluded. • Contract is a negotiable instrument. • Agent’s performance is personal. • 3rd party would have contracted if he knew the Principal’s identity.

  12. Liability: Unauthorized Acts • Unauthorized acts outside of Agent’s express, implied or apparent authority. • If Agent has no authority, Principal is not liable, but Agent is liable.

  13. Actions by E-Agents • An “e-agent” is a semi-autonomous computer program capable of executing specific tasks on behalf of a principal. • E-commerce uses e-agents to create contracts every day.

  14. § 3: Liability For Agent’s Torts • Agent is liable to 3rd party for his own torts. • Principal may be liable for Agent’s torts if they result from: • Principal’s own tort. • Principal’s authorization of tort. • Agent’s unauthorized but fraudulent conduct made within scope of agency.

  15. Liability for Agent’s Negligence • Applies only to Employer-Employee relationships. • Doctrine of Respondeat Superior: Employer is vicariously liable for Employee’s negligent torts committed within the Agent’s “course and scope of employment.”

  16. “Course and Scope of Employment”

  17. Employer Liability • Departures from the Employer’s Business: was departure minor or substantial? • Case 32.2:Joel v. Morrison (1834). • Borrowed Servants. • Notice of Dangerous Conditions.

  18. Liability for Agent’sIntentional Torts • Principal liable for intentional torts committed with the scope of employment. • Employee is a tortfeasor as well. • Employer is liable for Employee’s acts which Employer knew or should have known the Employee had a propensity to commit.

  19. § 4: Liability for Independent Contractor’s Torts • First determine whether worker is employee or independent contractor (factors p. 573). • General rule: Employer is not liable for acts of independent contractors because Employer no right to control. • Exception: hazardous activities • Independent Contractor is liable for her own torts. Case 32.3: Haag v. Bongers(1999).

  20. P Generally Not Liable(unless strict liability) Independent Contractor Outside CSE-P Not Liable Within CSE -P Liable Employee Factors “Course and Scope of Employment” Review: P’s Liability Analysis Worker

  21. § 5: Liability for Agent’s Crimes • General Rule: Agent is liable, Principal is not, unless: • Principal authorized or participated in crime. • Some jurisdictions hold Principal liable for violating statutes.

  22. § 6: Liability for Subagent’s Acts • If Agent is authorized to hire subagents, Principal is liable for the acts of the subagent. • If Principal undisclosed, Agent is responsible for wages and Principal liable for torts.

  23. § 7: Termination of An Agency • Agency can be terminated by: • An Act of the Parties; or • By Operation of Law. • Once agency terminated Agent has no actual authority to bind the Principal, but may have apparent authority to bind Principal.

  24. Termination By Act of the Parties • Lapse of Time. • Purpose Achieved. • Occurrence of a Specific Event. • Mutual Agreement. • Termination by One Party. • Notice of Termination.

  25. Termination By Operation of Law • Death or Insanity of either Principal or Agent: automatic. • Impossibility. • Changed Circumstances. • Bankruptcy. • War.

  26. Law on the Web • Agency at Cornell U. • Agency at ‘Lectric Law Library. • Legal Research Exercises on the Web.

  27. Emerging Trends • Intelligent Agents: autonomous or semi-autonomous internet programs that interact with people or other programs to execute specific tasks, including the searching, ordering and delivery of goods via “point and click” electronic contracts on the internet. • Generally, these agents have at least apparent authority to act for and bind Principal who is estopped. Return

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