Chapter 33

3 scenarios where undisclosed principal cannot require the third party to fulfill the contract

1) Undisclosed principal was expressly excluded as a party in the written contract 2.) Contract is negotiable instrument signed by the agent with indication of signing in a representative capacity 3.) Performance of the agent is personal to the contract, allowing the third party to refuse performance of the principal

6 things to remember about ratification

1.) Agent must have acted on behalf of an identified principal who ratifies the action 2.) Principal must know all material facts involved in the transaction 3.) Principal must affirm the agent's act in its entirety 4.) Principal must have legal capacity to authorize transaction at the time agent engages in the act and when principal ratifies. Third party must also have legal capacity. 5.) Principals ratification must occur before third party withdraws from the transaction 6.) Principal must observe same formalities when ratifying as would have been required if they had authorized it initially

Five ways to terminate by operation of law

1.) Death or insanity- Knowledge of this is not required 2.) Impossibility- When specific subject matter is destroyed, agency terminates 3.) Changed circumstances- When event occurs that has such an unusual effect on the subject matter that agent can reasonably infer that principal will not want the agency to continue 4.) Bankruptcy- If either petitions for bankruptcy then agency is usually terminated unless financial status is irrelevant to purpose or if it is insolvency instead of bankruptcy 5.) War- When principal and agent's country are at war

Five ways agency can be terminated by one of the parties

1.) Lapse of time- If agreement specifies period of time that agency will last for then when that time is up, the agency ends as well 2.) Purpose Achieved 3.) Occurrence of a specific event stated within the contract 4.) Mutual Agreement 5.) Termination by one party- Either party can terminate because agency is consensual. If agent does it is called renunciation and principal's act is revocation. Although both may have power to terminate, they may not possess the right to and can be liable for breach of contract or wrongful termination

Disclosure of the Principal

Agent is obligated to perform regardless of whether principal was disclosed but disclosure of principal dictates whether agent may be held liable. If principal is disclosed then agent has no contractual liability for nonperformance but if principal is partially disclosed then agent is also treated as a party to the contract and third party can hold the agent liable for the nonperformance. When principal is undisclosed, principal is bound to perform and if they do not then if agent is forced to pay the third party, the agent is entitled to indemnification by the principal. When the undisclosed principal is revealed, the third party can elect to hold either the principal or the agent liable on the contract. If the agent contracts with the third party for an unauthorized act then the principal cannot be held liable and if the third party knows that the agent does not have the authority to make a contract or expresses uncertainty about the extent of the authority then the agent is not personally liable.

Direct and constructive notice

Direct notice is required for termination of agency to those who have dealt with the agency while only constructive notice is required to all other parties

Details of termination of agency

Even when allowed to terminate a reasonable time period must be given (either enough time to recoup expenses or to make a normal profit). When agency is terminated it is the principal's duty to inform any third parties who knew of the existence of the agency that it has been terminated. Actual authority ends when the agent is terminated but apparent authority exists until the third party receives notice. No form is required for notice of termination to be effective. Termination of law does not require notification of third party unless agent's authority is coupled with an interest (when agency relationship is created for the agent's benefit).

Implied Warrant of Authority

Is breached if an agent for a disclosed or partially disclosed principal contracts with a third party and the third party relies on the agency status then they can hold the agent liable

Ratification

Occurs when principal affirms an agent's unauthorized act and once this is done the action will be considered authorized.

Emergency Power

Possessed by agent when unforeseen emergency demands action to protect or preserve the rights or property of the principal but the agent cannot communicate with them