Chapter 26: Agency Liability to Third Parties and Termination Miller Chapter 26: Agency Liability to Third Parties and Termination

§1: Scope of Agent’s Authority Principal is liable for Agent’s acts when Agent has either actual or apparent authority: Actual Authority: express or implied. Apparent Authority: estoppel, emergency and ratification.

Scope of Agent’s Authority Express Authority. Can be oral or written. Equal Dignity Rule: if law requires written contract, agent’s authority must be in writing, or contract voidable. 

Scope of Agent’s Authority Express Authority. Exceptions: Executive Officer acting for Corporation. Agent acts in Principal’s presence. When Agent’s act of signing is a mere formality.

Scope of Agent’s Authority Express Authority. Power of Attorney. POA is a written document and usually notarized. Special: specified acts only. General: all business for principal. Terminates on principal’s death or incapacity.

Scope of Agent’s Authority Implied Authority. What is reasonably necessary to carry out express authority. Inferred or conferred by custom, or agent’s position. Did agent reasonably believe she had authority to do the act?

Scope of Agent’s Authority Apparent Authority. Arises based on what principal causes a THIRD party (not agent) to believe. Agent has apparent authority when principal, causes 3rd party to reasonably believe that Agent has authority to act for Principal. 

Scope of Agent’s Authority Apparent Authority. Pattern of Conduct: apparent authority usually comes into existence over time. CASE 26.1 Lundberg v. Church Farm, Inc. (2010).

Scope of Agent’s Authority Apparent Authority. Apparent Authority and Estoppel. If 3rd party changes legal position by relying on principal’s representations, principal is estopped (prevented) from denying agent had authority to contract.

Scope of Agent’s Authority Emergency Powers. Arises when: Agent should protect Principal. Agent cannot communicate with Principal.

Scope of Agent’s Authority Ratification. Occurs when principal accepts responsibility for an agent’s unauthorized act (express or implied). Requirements: Agent must act on behalf of Principal. Principal must affirm entire deal. 

Scope of Agent’s Authority Ratification. Principal must affirm before 3rd party withdraws from transaction. Principal and 3rd party must have legal capacity to contract when Agent made the deal. Principals must know all the material facts involved in the transaction.

§2: Liability for Contracts Principals are classified as: Disclosed: identity known to 3rd party. Partially Disclosed: 3rd party knows he is dealing with an agent, but doesn’t know principal’s identity. 

Liability for Contracts Principals are classified as: Undisclosed: 3rd party does not know he is dealing with an agent (or agent is the principal), and therefore the principal’s identity is totally unknown.

Liability for Contracts Authorized Acts. Disclosed or Partially Disclosed Principal: liable to 3rd party if agent acts within scope of authority. Agent has no liability to 3rd party for disclosed principal’s non-performance. Although agent may be liable if principal is partially disclosed.

Liability for Contracts Authorized Acts. Undisclosed Principal: no liability unless: Principal expressly excluded. Contract is a negotiable instrument. Agent’s performance is personal. 

Liability for Contracts Authorized Acts. Undisclosed Principal: no liability unless: 3rd party would have contracted if he knew the principal’s identity. CASE 26.2 Williams v. Pike (2011).

Liability for Contracts Unauthorized Acts. Unauthorized acts are outside the agent’s express, implied, or apparent authority. If agent has no authority, principal is not liable, but agent is personally liable.

Liability for Contracts 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.

§ 3: Liability For Torts and Crimes Agent is liable to 3rd party for his own torts. Principal 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 Torts and Crimes Principal may be liable for agent’s torts if they result from (cont’d): Liability for Agent’s Misrepresentation. Apparent Implied Authority. Innocent Misrepresentation.

Liability For Torts and Crimes Liability for Agent’s Negligence. Doctrine of Respondeat Superior: employer is vicariously liable for employee’s negligent torts committed within the agent’s “course and scope of employment.” 

Determining the Scope of Employment Factors (p. 501) Employer Liable Employer NOT Liable No Yes Was Employee’s act authorized by Employer? ? The Time place and purpose of act (factually based) No Yes Was act commonly performed by Employees? No Yes Did act advance Employer’s interests? No Yes Did Employer furnish instrumentality (tools)? No Yes Did Employer have reason to know Employee would do the act? No Did the act involved a serious crime?

Liability For Torts and Crimes Liability for Agent’s Negligence. CASE 26.3 Auer v. Paliath (2013). Distinction Between a “Detour” and a “Frolic”: if detour principal is liable, if frolic principal is not liable. 

Liability For Torts and Crimes Liability for Agent’s Negligence. Employee Travel Time: to or from meals is outside scope of employment. Notice of Dangerous Conditions.

Liability For Torts and Crimes Liability for Agent’s Intentional Torts. Principal is liable for intentional torts committed within the scope of employment. 

Liability For Torts and Crimes Liability for Agent’s Intentional Torts. Employer is also liable for employee’s acts, which employer knew or should have known the Employee had a propensity to commit.

Liability For Torts and Crimes Liability for Independent Contractor’s Torts. General Rule: Employer is not liable for acts of independent contractors because employer has no right to control. 

Liability For Torts and Crimes Liability for Independent Contractor’s Torts. Exceptions: Strict liability for unusually hazardous activities, transportation of highly volatile chemicals, or use of poisonous gases.

Liability For Torts and Crimes Liability for Agent’s Crimes. Agent is liable for her own crimes. Principal is not liable, even if the crime was committed within the scope of employment, unless: Principal participated in the crime. Some states, principals may be liable for agent violation of regulations.

Review: Principal’s Liability P Generally Not Liable (unless strict liability) Independent Contractor Employee See Factors p.477 Worker Outside CSE-P Not Liable Within CSE -P Liable See “Course and Scope of Employment” p. 649

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

Termination of An Agency Termination by Act of Parties. Lapse of Time. Purpose Achieved. Occurrence of a Specific Event. Mutual Agreement. Termination by One Party. Notice of Termination.

Termination of An Agency Termination by Operation of Law. Death or Insanity of either Principal or Agent: automatic. Impossibility. Changed Circumstances. Bankruptcy. War