Chapter 36: Third-Party Relations Of The Principle And The Agent

Which of the following actions of a principal would amount to implied ratification?

A principal's part performance of a contract made by an agent

_____________ authority arises when a principal's manifestations cause a third party to form a reasonable belief that the agent is authorized to act in a certain way.

Apparent

___________ authority exists because it appears that an agent may act for a principal, based on what the principal has manifested to __________. (Choose two correct answers)

Apparent a third party

Match the two types of tort bases of a principal's liability (left column) with their corresponding features (right column). Instructions

Direct liability ----- It requires that a principal be at fault. Vicarious liability ----- It requires only that an agent be at fault.

____________ is a concept that states that a person may be liable for an actor's transaction with a(n) _________ who justifiably is induced to make a detrimental change in position because he believed the actor had authority to act for the person. (Choose two correct answers)

Estoppel

True or false: Under the respondeat superior doctrine, a principal who is an employer is liable for torts committed by agents who are employees who commit the tort while acting outside the scope of their employment.

False

_____________ authority usually derives from a grant of express authority by a principal.

Implied

_________ authority provides an agent the power to do whatever it is reasonable to assume that her principal wanted her to do, in light of the principal's manifestations and objectives.

Implied authority

_____________ does not occur if an agent acts adversely to the principal with an intent to act solely for the agent's own purposes or those of another person.

Imputation

_____________ relates back to the time when the contract was made and binds the principal as if the agent had possessed authority at that time.

Ratification

______________ occurs when a principal binds himself to an unauthorized act done by an agent, or by a person purporting to act as an agent.

Ratification

____________ makes a principal liable for her employees' negligence torts while working within the scope of their employment.

Respondeat superior

Identify two bases on which a principal's liability for an agent's torts can be found: ___________ and ____________. (Choose two correct answers)

Vicarious liability Direct liability

One true statement about torts committed by nonemployee agents is that: _____________.

a principal ordinarily is not liable for torts committed by nonemployee agents

Choose TWO consequences when both the principal and the agent are liable for an agent's torts: _____________ and ______________. (Choose two correct answers)

a third party can sue either or both individually and get a judgment against either or both. a third party can join the principal and the agent in one suit and get a judgment against each.

A principal's actions would amount to implied ratification when he _____.

accepts the benefits under an unauthorized contract

Estoppel is different from apparent authority because it does not require that the purported principal have made any manifestation that the purported agent can _____________.

act for him

Regardless of a principal's nature, an agent may expressly bind himself to a contract by ____________.

acting as surety or guarantor for that principal

In the context of contract liability of an agent, an undisclosed principal becomes party to a contract only when the agent _______________.

acts on the principal's behalf in making the contract

An agent's power to take an action designated or implied in a principal's manifestations to the agent is called _______________.

actual authority

In situations where a principal is undisclosed, the third party reasonably believes that the ____________.

agent is the other party to the contract

The nature of a principal becomes unidentified when a(n) ____________.

agent simply neglects to disclose his principal's identity

A(n) ___________________ determines an agent's actual authority.

agent's reasonable understanding of a principal's manifestations and objectives

Identify TWO situations where an agent would not be held liable for making an unauthorized contract, when (a) ____________ and when a(n) ______________. (Check all that apply.)

an agent adequately notifies a third party that the agent does not warrant her authority to contract a principal subsequently ratifies an unauthorized contract

By telling a third party that an agent has certain authority or by directing the agent to do the same, a principal can give her agent _____________ authority.

apparent

A principal is liable on a contract made by her agent if the agent had __________ or ___________ authority to make the contract (Check two correct answers).

apparent actual

If an agent has authorized his subagent to make a certain contract and this authorization is within the authority granted the agent by her principal, the principal is ____________.

bound to the subagent's contract

An agent who represents a(n) ____________ principal is not liable on authorized contracts made for such a principal unless he agrees otherwise.

disclosed

A principal has less ability to prevent a nonemployee agent's torts because he ____________.

does not control the manner in which the nonemployee agent's work is performed

Respondeat superior motivates employers to ensure that their ___________.

employees avoid tortious behavior

Identify two situations according to the Restatement in which an employee acts within the scope of employment: when ____________ and when ____________. (Choose two correct answers.)

engaging in a course of conduct subject to the employer's control performing work assigned by an employer

Choose ONE precaution that an agent should take to avoid contract liability, he should: _____________.

ensure that the agreement obligates only the principal.

An agent can escape tort liability if he ___________.

exercises a privilege of the principal

Actual authority of an agent that is indicated by a principal using very specific language is called ______________ authority.

express

Agents can bind themselves to contracts they make for a principal by __________.

expressly agreeing to be liable

Respondeat superior is a rule of imputed or vicarious liability because it bases an employer's liability on ____________.

her relationship with the employee

A principal can be liable for the actions of a nonemployee agent's negligent failure to take the special precautions needed to conduct certain: ___________ or _________ activities such as the demolition of a building. (Choose two correct answers)

highly dangerous inherently dangerous

An agent given full control over real property has ______________ to contract for repairs and insurance and may rent the property if this is customary.

implied authority

An agent hired to manage a business normally has _______________ to make contracts that are reasonably necessary for conducting the business or that are customary in the business.

implied authority

A principal is directly liable for misrepresentations made by his agent during authorized transactions if she _______________.

intended that the agent make the misrepresentations

According to the respondeat superior doctrine, choose two actions by an employee would make a principal liable: __________ and __________. (Choose two correct answers)

intentional torts negligence

An exception for the rule that principals are not liable for torts committed by nonemployee agents occurs when a principal: ____________.

is liable for harm resulting from the nonemployee agent's failure to perform a duty of care

Identify TWO ways in which agents may expressly bind to contracts, by: ___________ and by: ____________. (Choose two correct answers.)

joining the principal as obligors on the contract making a contract in their own names

Unless there is an agreement to the contrary, an agent who purports to act for a(n) _____________ principal is personally liable when the agent knows the principal is not real.

legally nonexistent

Clark is a salesman for Jeremy, a seller of cars. Clark has actual authority to receive offers for the sale of Jeremy's cars but not to make sale contracts. This must be approved by Jeremy himself. Clark contracts to sell Jeremy's cars to Walter on Jeremy's behalf. He represents himself as Jeremy's agent but says nothing about his authority. Walter believes that Clark has authority to sell Jeremy's cars. In this case, Clark is _____.

liable to Walter and Jeremy for breaching his implied warranty of authority

An agent who wishes to avoid liability should ______________.

make no express promises in his own name

Special rules apply when a third party sues a principal for ___________ made by her agent.

misrepresentations

Suppose both principal and agent are liable for an agent's tort. When a third party actually collects in full from either the principal or the agent: ____________.

no further recovery is possible.

An agent has ____________ liability even when the third party knows that the principal is legally __________ or lacks capacity. (Choose two correct answers)

nonexistent contract

Suppose John allows Henry to use his guest house to accommodate business clients who might visit him. If Henry's agent Matthew stays at John's guest house at Henry's orders, then Matthew would _____________.

not be liable for trespassing on John's property

According to most courts, an employee's conduct should ____________ to fall within his scope of employment.

occur substantially within the location authorized by an employer

A principal is unidentified when he asks his agent to keep his identity secret to ____________.

preserve his bargaining position

Two reasons for a principal being undisclosed are when: ______________ or when a(n) _______________. (Choose two correct answers.)

principal judges that he will get a better deal if his or her existence and identity remain secret agent neglects to make adequate disclosure

Actual authority is the authority that a(n) ____________ to possess.

principal wants an agent

One true statement about apparent authority is that it: __________________.

protects third parties who reasonably rely on a principal's manifestations that an agent has authority.

The process whereby principals bind themselves to unauthorized acts done by their agent or by a person purporting to act as an agent is called _____________.

ratification

Even when an agent lacks the authority to contract, a principal may bind herself to it by later ____________.

ratifying a contract made by an unauthorized agent

One of the following is true about liability to a third party based on an agent's implied warranty of authority, and that is liability to a third party exists _______________.

regardless of whether the agent is otherwise bound to the third party

The more important type of vicarious liability is based on the doctrine of __________.

respondeat superior

A(n) ___________ contracting within the authority conferred by her principal (the agent) binds the agent in an appropriate case.

subagent

Identify the TWO ways in which principals can give apparent authority to their agents through : _____________ and through __________. (Choose two correct answers)

the statements they make or tell their agents to make to third parties the actions they knowingly allow their agents to take with third parties

An agent is not liable for making an unauthorized contract if the __________.

third party actually knows that the agent lacks authority

A principal is considered to be disclosed if a : ________________ or if a: _________________. (Check all that apply.)

third party has reason to know the principal's identity third party has reason to know that the agent is acting for a principal

Choose two of the following actions that involve a principal's direct liability: ____________ and ____________. (Choose two correct answers.)

tortious conduct by an agent while acting within his actual authority ratification of a tortious act of an agent by a principal

A principal is ____________ when a third party lacks knowledge or reason to know both the principle's existence and the principal's identity.

undisclosed

When a third party knows or has reason to know that the agent is acting for a principal, but lacks knowledge or reason to know the principal's identity, the principal is ____________.

unidentified

An agent's knowledge of facts is imputed to the principal means that the principal's rights and liabilities are ____________.

what they would have been if the principal had known what the agent knew

According to the Restatement, an employee acts ____________ when engaging in a course of conduct subject to the employer's control.

within the scope of employment

When an employee's conduct is motivated to any appreciable extent by the desire to serve the employer, then his tort would be _____________.

within the scope of employment

Identify TWO factors that affect an agent's liability, the: ____________ and the: ____________. (Choose two correct answers)

wording of the contract way the agent has signed the contract