Chapter 20 Business Law

Ways in which apparent authority may arise

1) When principal appoints an agent to a position in an organization, 3rd parties reasonably believe that the agent has the authority to do acts customary of someone in that position. 2) Principal gives agent authority to engage in a transaction, so subsequently imposed restrictions will not affect the agent's authority until the 3rd parties are alerted of the restrictions. 3) Principal's acquiescence in prior similar transactions between the agent and 3rd party may create a basis for 3rd party to reasonably believe the agent has authority.

Disclosed principal

A principal is a disclosed principal when an agent and a third party interact, the third party has notice that the agent is acting for a principal and also ad nothing of the principal's identity.

Liability - authorized acts of an agent

A principal who authorizes their agent to commit a tortious act with respect to the property or person of another is liable for the injury or loss that the person sustains. It also extends to unauthorized tortious conduct that was ratified.

Liability - unauthorized acts of an agent

A principal who negligently conducts activities through an employee or other agent is liable for harm resulting from such conduct. Negligent hiring occurs when the principal does not exercise proper care in selecting an agent for the job to be done.

Apparent authority

Acts or conduct of the principal that lead a 3rd person to believe that the agent, or supposed agent, has actual authority upon which the 3rd person justifiably relies. Confers upon the agent the power to bind the disclosed or unidentified principal in contact with 3rd persons and precludes the principal from denying the existence of actual authority.

Agent assumes liability

An agent for a disclosed principal may agree to become liable on a contract between the principal and the third party 1) by making the contract in their own name 2) by co-making the contract with the principal 3) by guaranteeing that the principal will perform the contract between the 3rd party and the principal

Unidentified principal (partially disclosed)

An agent who acts for a partially disclosed principal is a party to the contract with the 3rd party unless otherwise agreed.

Undisclosed principal

An agent who acts for an undisclosed principal is personally liable on the contact to the third party.

Respondeat superior

An employer is subject to vicarious liability for an unauthorized tort committed by their employee, even one committed in disobedience of their instructions, if the employee committed the tort within the scope of their employment.

Actual authority

Depends upon consent that the principal manifests to the agent. It can be expressed or implied, it is binding and gives the agent power and the right to create legal relations with the principal and a 3rd party.

Unauthorized contracts

If a purported agent misrepresents to a 3rd person that they have authority to make a contract on behalf of a principal whom they have no power to bind, they are liable in a tort action to the 3rd person for the loss they sustained in reliance upon the false representation.

Direct liability of the principal

It means the principal is liable for their own tortious conduct involving the use of their agents. It can occur in one of two ways 1) the principal directs the agent to commit a tort 2) the principal fails to exercise their reasonable care in employing competent agents

Tort liability of the principal

May arise directly or indirectly from authorized or unauthorized acts of an agent, where the principal is liable in tort to 3rd persons. A principal is liable for the unauthorized torts an agent commits in connection with a transaction that the principal, with full knowledge of the tort, ratified.

Helper, a delivery boy for Gunn, delivered two heavy packages of groceries to Reed's porch. As instructed by Gunn, Helper rang the bell to let Reed know the groceries had arrived. Mrs. Reed came to the door and asked Helper if he would deliver the groceries into the kitchen because the bags were heavy. Helper did so, and upon leaving he observed Mrs. Reed having difficulty in moving a cabinet in the dining room. He undertook to assist her, but being more interested in watching Mrs. Reed than the cabinet, he failed to observe a small, valuable antique table, which he smashed into with the cabinet and totally destroyed. Does Reed have a cause of action against Gunn for the value of the destroyed antique?

No, Gunn is not responsible. Helper acted outside of his job description, he should be held accountable for Reed's antique table.

Actual implied authority

Not found in express or explicit words, inferred from words or conduct that the principal manifests to the agent. The agent has implied authority to do that which they reasonably believe the principal wishes they do.

While crossing a public highway in the city, Joel was struck by a horse-drawn cart driven by Morison's agent. The agent was traveling between Burton Crescent Mews and Finchley on his employer's business and was not supposed to go into the city at all. Apparently, the agent was on a detour to visit a friend when the accident occurred. Joel brought this action against Morison for the injuries sustained as a result of the agent's negligence. Morison argues that he is not liable for his agent's negligence because the agent had strayed from his assigned path. Who is correct?

Respondeat Superior.Judgment for Joel. Under the doctrine of respondeat superior, the principal is liable for his agent's negligence only if the agent was acting in the course of his employment at the time of the accident. On the other hand, the principal is not liable if the accident occurred while the agent was out on a frolic of his own and not on his master's business. In this case, however, the agent was driving on Morison's business but had momentarily gone out of his way against his master's implied command in order to visit a friend.

Cook's Department Store advertises that it maintains a barbershop in its store and that the shop is managed by Hunter, a Cook's employee. Actually, Hunter is not an employee of the store but merely rents space in the store. While shaving Joran in the barbershop, Hunter negligently its a deep gash, requiring 10 stitches, into one of Jordan's ears. Should Jordan be entitled to collect damages from Cook's department store?

Technically, Hunter and Cook don't have an agency relationship, but because Cook advertises the shop as being managed by Hunter, Cook's employee, Cook is stuck with that information. Cook is estoppeled from denying the relationship (agency by estoppel). Based on respondent superior, Cook (employer) is liable for unauthorized torts committed by an employee (Hunter) in the scope of his employment.

Ratification

The confirmation or affirmance by one person of a prior unauthorized act performed by another who is their agent or who purports to be their agent.

Actual express authorit

The express authority of an agent is found in spoken or written words that principal communicates.

Torts of independent contractors

The principal may be directly liable for an independent if she fails to exercise reasonable are in selection an independent contractor.

Agent acts with apparent authority

This liability applies to agents whether they are or are not employees and agents who are employees but whose tortious conduct is not within the scope of employment under respondeat superior. EX: P engages A to sell his land. While negotiating with T, A states that a river near the land has not had an overflow in 10 years. A knows this is false. T relies on this and buys the land. P is liable to T.

Paula instructed Alvin, her agent, to purchase a quantity of hides. Alvin ordered the hides from Ted in his own (Alvin's) name and delivered the hides to Paula. Ted, learning later that Paula was the principal, sends the bill to Paula, who refuses to pay Ted. Ted sues Paula and Alvin. What are Ted's rights against Paula and Alvin?

Undisclosed Principal . Decision for Ted. Ted is entitled to recover the price either from Alvin or Paula, but not both of them. Upon learning of the undisclosed principal, Ted may treat Alvin as the agent and hold the principal or he may disregard Paula and hold Alvin with whom he contracted as a principal. Ted may bring suit against Alvin and Paula, but before conclusion of the trial must make an election as to which one he wishes to take judgment against. He cannot obtain judgment against both, but may against either.

Van D. Costas, Inc. (Costas) entered into a contract to remodel the entrance of the Magic Moment Restaurant owned by Seascape Restaurants, Inc. Rosenberg, part owner and president of Seascape, signed the contract on a line under which was typed "Jeff Rosenberg, The Magic Moment." When a dispute arose over the performance and payment of the contract, Costas brought suit against Rosenberg for breach of contract. Rosenberg contended that he had no personal liability for the contract and that only Seascape, the owner of the restaurant, was liable. Costas claimed that Rosenberg signed for an undisclosed principal and, therefore, was individually liable. Explain whether Rosenberg is liable on the contract.

Unidentified (Partially Disclosed) Principal Yes, Rosenberg is individually liable. To avoid personal liability, an agent must disclose both that he is acting as an agent and the identity of his principal. If the contracting party knows the identity of the principal for whom the agent is acting, the principal is considered disclosed. It is not the contracting party's duty to seek out the identity of the principal. Here, nothing indicates that Costas had ever heard of Seascape at the time the contract was signed. Moreover, use of a trade name (here, Magic Moment) is not sufficient disclosure of the identity of the principal. Rosenberg knew that Seascape was the owner, and he could have avoided personal liability by properly disclosing the identity of his principal. Since he did not, Rosenberg is personally liable.

Authorized contracts

When an agent is acting with actual or apparent authority makes a contract with a 3rd party on behalf of a disclosed principal, the agent is not a party to the contract unless the agent and the 3rd party agree otherwise.

Independent contractor

When the principal is not in control of the manner and means of the agent's performance of the work, the agent is not an employee and is instead an independent contractor.