Principal's Liability For Agent's Contracts Outline

PRINCIPAL’S LIABILITY FOR AGENT’S CONTRACTS

Issues here arise when A makes K w/a 3^rd Party

Rules governing P liability here is different than P liability for A torts.

CONTRACTUAL POWERS OF AGENTS

AUTHORITY:

1. EXPRESS AUTHORITY

King v. Bankerd

POA that Bankerd (P) gave to attny-friend King (A) authorizing “convey, grant, bargain, and/or sell” his (P’s) property

Attny in Fact=POA=Agent

Issue: did poa give authority to King (A) to give the property to Bankerd’s wife?

Under agency still required be acting on best interests of and OBO of P and giving away his prop is not in those interests.

Bankerd obviously didn’t intend for the POA to be used to benefit his wife.

1. Actual Express Authority:

The Agents “power” to enter into contracts for and bind Principal

Actual authority is created by manifestations of P to the A that he/she has authority to do some act

Power-ability of a person to create legal rights & obligations (the power to alter the Principals legal status)

Doesn’t have to be written, or if is written a formal POA, but has to be express (words spoken)

2. Actual Implied Authority

(authority really exists)

-Still based on manifestations by the P to the A that he has this authority.

-The agent must have an objectively reasonable belief that this authority exists

-The authority believes has would be necessary or usual to accomplish what express authority is for or reasonable belief of agent to act based on the express authority given

2. APPARENT AUTHORITY

Smith v. Hansen, Hansen & Johnson

Emply. Foster (A) worked for Fentron(P) but Fentron says he was not authorized to make the sale to HH&J and so K not binding and so warranties not binding as to Fentron

HH&J argues that Foster created appearance that he did have the authority, ie (apparent authority)

Manifestations: (business cards, office/phone, Title-Manager of Manufacturing Services)

Just cause had authority to do some things, doesn’t mean authority to do this act.

Manifestation to the 3^rd party must be manifestations of authority to do the particular act in question.

ELEMENTS:

1. Manifestations have to be made by the P to the 3^rd Party (abt this kind of particular K)

Any manifestations by the A are irrelevant, unless authorized to make that particular manifestation which would be actual authority

2. The 3^rd Party MUST have an objectively reasonable belief in the authority

Sauber v. Northland Insurance Co

An employer can create apparent authority in an agent to a 3^rd party simply by allowing an employee to answer the phone

Rule: if

1. The business has invited the public to use the phone to transact business with it,

2. The business has permitted an employee to answer the phone;

3. Such person has purported to act for the business w/ authority; and

4. The person calling the place of business had a right to assume that the person permitted to answer the phone had authority to act (reasonably thought had authority)

Foley v. Allard

Foley invested with a Allard (argued A) and then he bounced with the money, she tried use phone rule cause was during a time when didn’t have stock exchange floor and this is how investors did business but didn’t actually work for the company

-but no one ever represented to Foley that Allard workd for co.

-He was not an employee so had zero authority so no manifestation conduct

-He did actually answer but got tranfered calls

-Her belief was also otherwise unreasonable (personal check, no risk, etc)

Also, the manifestations, if any by P, must have occurred BEFORE the K is made.

“indicia” of authority: if give POA, bus cards, letter w/ sig. to agent/employee then not reasonable for P to assume wouldn’t show a 3^rd pty.

Gizzi v. Texaco

Breaks fail on purchased van/& fixed on van

A=Hinman P=Texaco T=Gizzi

Transaction in question is the sale of the van

T must show that P made manifestions that A was authorized to SELL the van to T OBO P

Ct. says yes manifestations of authority (but really seem more like manifestations to repair not sell)

Apparent authority is a question of fact for jury

-Acquiescence doesn’t creat apparent authority to contract cause its not a manifestation (not conduct or words) so can’t create a binding contract

Apparent authority can be established by prior dealings btwn the parties, but the dealings must be similar to the one at issue & there must be a “degree of repetitiveness” not just 1 time.

3. ESTOPPEL

If don’t have manifestations then must use Estoppel (ie see acquiescence above)

Hoddeson

The fake furniture sales guy

Can’t work for apparent authority cause wasn’t an employee so not an agent at all and no manifestations by the a P.

But can go back and proceed on Estoppel if can show the furniture co. knew guy was walking around the store and such and did nothing to stop it. Then can show acquiescence.

If and only if a person hasn’t made any manifestations can you get to Estoppel

4. INHERENT AGENCY POWER

Edison v. Kidd

Tone Test recital case

Kidd was employed by Fuller (A) who was acting for Edison (P) to sing

Fuller was known as the General Supervisor of the Musical Division and made a contract w/ Kidd

Edison claimed Fuller as agent didn’t have authority to make the K.

Didn’t have apparent authority whatever he did have, and what did have was limited in scope

When you choose to use/operate through an agent the you take the risks that go with it.

Take the risk that your agent is going to deviate from your instructions as long as they are still w/in the scope of your business.

Inherent Agency Power:

Gives agent power to bind P to a K

Arises from the Agency relationship itself

Only applies to “general agents (manager role) that have very broad power/authority- as applied to special agents whose power is specific to certain limited projects and such

Watteau v. Fenwick

Humble (A) used own business but sold it to Fenwick (P) but stayed on as manager. Was...

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