Ch. 20 Relationship with 3rd Parties
Ch. 20 Relationship with 3rd Parties Principal and 3rd Persons Contract Liability of Principal Types of Principals Disclosed Principal- principal whose existence and identity are known. Partially Disclosed Principal- principal whose existence is known and identity is not known. An example would be an auctioneer who sells on behalf of a seller who is not identified. Undisclosed Principal- principal whose existence and identity are not known. Authority- power of an agent to change the legal status of the principal. Actual Authority- power conferred upon the agent by actual consent given by the principal. It can be expressed or implied. When the principal is undisclosed, an agent acting with actual authority in making the contract will contractually bind the principal and the 3rd party unless the terms of the contract exclude the principal from being a party or unless the agent fraudulently conceals the principal’s existence from the 3rd party. Actual Express Authority- actual authority derived from written or spoken words of the principal.
unit the
Actual Implied Authority- actual authority inferred from words or conduct manifested to the agent by the principal. Ex: Pearson authorizes Rob to manage her 82 apartment complex but says nothing about expenses. In order to manage building, Rob must employ a janitor, purchase fuel for heating and arrange orderly maintenance. These expenses are necessary to run the apartment.
Apparent Authority- power conferred upon the agent by acts or conduct of the principal that reasonably lead a 3rd party to believe that the agent has such power. Ex: Arlene, in the presence of Polly, tells Thad that Arlene is Polly’s agent to buy lumber. Although the statement is not true, Polly does not deny it, as she easily could. Thad, in reliance upon the statement, ships lumber to Polly on Arlene’s order. Polly is obligated to pay for the lumber b/c Arlene had apparent authority to act on Polly’s behalf. This apparent authority of Arlene only exists with respect to Thad. If Arlene were to give David an order for a shipment of lumber to Polly, David would be unable to hold Polly liable.
Delegation of Authority- is usually not permitted unless expressly or impliedly authorized by the principal; if the agent is authorized to appoint other subagents, the acts of these subagents, the acts of these subagents are as binding on the principal as those of the agent. Effect of Termination of Agency of Authority- ends actual authority. Termination by Operation of Law- apparent authority also ends without notice to the 3rd parties. Termination by Act of Parties- apparent authority ends when 3rd parties have actual knowledge or when appropriate notice is given to 3rd parties: actual notice must be given to 3rd parties with whom the agent has previously dealt on credit, has been specially accredited, or has begun to deal; all other 3rd parties as to whom there was apparent authority need be given only constructive notice(death read in newspaper). Ratification- affirmation by one person of a prior unauthorized act that another has done as her agent or as her purported agent. There can be no ratification by an undisclosed principal. Ex: Archie, without any authority, contracts to sell to Tina an automobile belonging to Pierce. Archie states that the auto is his. Tina promises to pay $5,500 for the automobile. Pierce subsequently learns of the agreement and affirms. Pierce’s affirmation of Archie’s action would not be a ratification b/c Archie did not purport to act on Pierce’s behalf. Fundamental Rules of Contractual Liability Disclosed Principal- is contractually bound with the 3rd party if the agent acts within her actual or apparent authority in making the contract. Partially Disclosed Principal- is contractually bound with the 3rd party if the agent acts within her actual or apparent authority in making the contract. Undisclosed Principal- is contractually bound with the 3rd party if the agent acts within her actual authority in making the contract. Tort Liability of Principal Direct Liability of Principal- a principal is liable for his own tortuous conduct involving the use of agents. Authorized Acts of Agent- a principal is liable for torts she authorizes another to commit. Unauthorized Acts of Agent- a principal is liable for failing to exercise care in employing agents whose unauthorized acts cause harm. Ex: Jeff tells Art to drive the company owned car to run a business errand. Art cannot drive b/c he is incapable of driving, anyone that Art hits will make Jeff liable for.
Vicarious Liability of Principal for Unauthorized Acts of Agent- principal is responsible if agent makes an authorized fraudulent misrepresentation of something. Respondeat Superior- an employer is liable for unauthorized torts committed by an employee in the course of his employment. Ex: If Earl throws match into oil vat and it lights the store on fire, the company that employed Earl would be responsible. Now if Page, a chauffeur, decides to shoot someone with a hand gun he bought while driving Nick around, Page is responsible for his own actions. Independent Contractor- a principal is usually not liable for the unauthorized torts of an independent contractor. The principle may be directly liable if she fails to exercise reasonable care in selecting an independent contractor (like hiring an alcoholic roofer). Criminal Liability of Principal Authorized Acts- the principal is liable if he directed, participated in, or approved the criminal acts of his agents. Unauthorized Acts- the principal may be liable either for a criminal act of a managerial person or under liability without fault statutes.
Agent and 3rd Persons Contract Liability of Agent Disclosed Principals- the agent is not normally a party to the contract she makes with a 3rd person if she is authorized or if the principal ratifies an unauthorized contract. Unauthorized Contracts- if an agent exceeds her actual or apparent authority, the principal is not bound but the agent may be liable for breach of warranty or for misrepresentation.
own the
Agent Assumes Liability- an agent may agree to become liable on a contract b/w the principal and a 3rd party. He can do this by: 1) making the contract in his name, 2) co-making the contract with the principle, or 3) guaranteeing that principal will perform the contract b/w the 3rd party and the principal.
Partially Disclosed Principal- an agent who acts for partially disclosed principal is a party to the contract with the 3rd party unless otherwise agreed. Undisclosed Principal- an agent acts for an undisclosed principal is personally liable on the contract to the 3rd party. Nonexistent or Incompetent Principal- a person who purports to act as an agent for a principal whom both the agent and the 3rd party know to be nonexistent or wholly incompetent is personally liable on a contract entered into with a 3rd person on behalf of such a principal.
Tort Liability of Agent Authorized Acts- the agent is liable to the 3rd party on his own torts. Unauthorized Acts- the agent is liable to the 3rd party on his own torts. Rights of Agent Disclosed Principal- the agent usually has no rights against the 3rd party. Partially Disclosed Principal- the agent may enforce the contract against the 3rd party. Undisclosed Principal- the agent may enforce the contract against the 3rd party.
Cases Case 1 Types of Authority Schoenberger v. Chicago Transit Authority Facts: Schoenberger was a worker for CTA. He was told by ZuChristian, who was in charge of recruiting for the Data Center, that Scoenberger that he desired to pay him an additional $500. It never happened and Schoenberger sued. Verdict: In favor of CTA. The trial court ruled: 1) that is was inconceivable that the plaintiff thought ZuChristian had final authority in regard to employment contracts; and 2) that it was not shown that a commitment or promise was made to the plaintiff by an authorized agent of the CTA. Case 2 Direct Liability of Principal: Negligent Hiring Connes v. Molalla Transport System, Inc. Facts: Terry Taylor was an employee of Molalla Transport System. He was a long-haul driver. When he applied for the job he had agreed that he was never convicted of a driving crime. Taylor stopped at a hotel when on a route and raped Connes who was working at the hotel. It turns out that Taylor was previously arrested for other sexual crimes in the past. Connes sued Molalla. Verdict: In favor of Molalla. Molalla had no legal duty to conduct an independent investigation into Taylor’s non-vehicular criminal background. Taylor had been instructed to sleep in the truck, not a hotel.
Case 3 Tort Liability of Principal Hulbert v. State Farm Mutual Automobile Insurance Company Facts: Hulbert were in a car accident with Dr. Murray’s nanny. In the car with the nanny was one of Dr. Murray’s children and they were behind Dr. Murray on their way to Florida for vacation. Hulbert sued Dr. Murray claiming respondeat superior. A trial court granted summary judgment to Murray. Verdict: Continue with the trial. Shortly after the accident, both Murray and the nanny told Hulbert that the nanny was going to help care for the children on vacation. One of Murray’s children was in the car with the nanny and the nanny was going to be paid for the vacation. There is a genuine issue of material fact as to whether at the time of accident if the child was with the nanny for personal or employment reasons. Case 4 Undisclosed Principal Redi-Floors, Inc. Sonenberg Co. Facts: Sonenberg managed Westchester Manor Apartments thru its on-site property manager, Judith. Manor Associates Limited Partnership, whose general partner is Westchester Manor, Ltd., owned the complex. The entry sign to the property did not reveal the owner’s name, but did disclose that Sonenberg managed the property. Judith contacted Redi-Floors to install carpet in selected units. They completed the work and received checks from “Westchester Manor Apartments”. Believing Sonenberg owned the complex, Redi-Floors did not learn of the true owner’s identity until a dispute arose concerning the payment of some of its later invoices. RediFloors sued Sonenberg, Manor Associates Limited Partnership, and Westchester Manor, Ltd. The court gave Redi-Floors $20,000 from Soneberg and Manor Associates Limited Partnership. Redi-Floors were never allowed to choose. Verdict: In favor of Redi-Floors. The trial court erred in not allowing Redi to obtain judgment from one of the defendants.
unit the
Actual Implied Authority- actual authority inferred from words or conduct manifested to the agent by the principal. Ex: Pearson authorizes Rob to manage her 82 apartment complex but says nothing about expenses. In order to manage building, Rob must employ a janitor, purchase fuel for heating and arrange orderly maintenance. These expenses are necessary to run the apartment.
Apparent Authority- power conferred upon the agent by acts or conduct of the principal that reasonably lead a 3rd party to believe that the agent has such power. Ex: Arlene, in the presence of Polly, tells Thad that Arlene is Polly’s agent to buy lumber. Although the statement is not true, Polly does not deny it, as she easily could. Thad, in reliance upon the statement, ships lumber to Polly on Arlene’s order. Polly is obligated to pay for the lumber b/c Arlene had apparent authority to act on Polly’s behalf. This apparent authority of Arlene only exists with respect to Thad. If Arlene were to give David an order for a shipment of lumber to Polly, David would be unable to hold Polly liable.
Delegation of Authority- is usually not permitted unless expressly or impliedly authorized by the principal; if the agent is authorized to appoint other subagents, the acts of these subagents, the acts of these subagents are as binding on the principal as those of the agent. Effect of Termination of Agency of Authority- ends actual authority. Termination by Operation of Law- apparent authority also ends without notice to the 3rd parties. Termination by Act of Parties- apparent authority ends when 3rd parties have actual knowledge or when appropriate notice is given to 3rd parties: actual notice must be given to 3rd parties with whom the agent has previously dealt on credit, has been specially accredited, or has begun to deal; all other 3rd parties as to whom there was apparent authority need be given only constructive notice(death read in newspaper). Ratification- affirmation by one person of a prior unauthorized act that another has done as her agent or as her purported agent. There can be no ratification by an undisclosed principal. Ex: Archie, without any authority, contracts to sell to Tina an automobile belonging to Pierce. Archie states that the auto is his. Tina promises to pay $5,500 for the automobile. Pierce subsequently learns of the agreement and affirms. Pierce’s affirmation of Archie’s action would not be a ratification b/c Archie did not purport to act on Pierce’s behalf. Fundamental Rules of Contractual Liability Disclosed Principal- is contractually bound with the 3rd party if the agent acts within her actual or apparent authority in making the contract. Partially Disclosed Principal- is contractually bound with the 3rd party if the agent acts within her actual or apparent authority in making the contract. Undisclosed Principal- is contractually bound with the 3rd party if the agent acts within her actual authority in making the contract. Tort Liability of Principal Direct Liability of Principal- a principal is liable for his own tortuous conduct involving the use of agents. Authorized Acts of Agent- a principal is liable for torts she authorizes another to commit. Unauthorized Acts of Agent- a principal is liable for failing to exercise care in employing agents whose unauthorized acts cause harm. Ex: Jeff tells Art to drive the company owned car to run a business errand. Art cannot drive b/c he is incapable of driving, anyone that Art hits will make Jeff liable for.
Vicarious Liability of Principal for Unauthorized Acts of Agent- principal is responsible if agent makes an authorized fraudulent misrepresentation of something. Respondeat Superior- an employer is liable for unauthorized torts committed by an employee in the course of his employment. Ex: If Earl throws match into oil vat and it lights the store on fire, the company that employed Earl would be responsible. Now if Page, a chauffeur, decides to shoot someone with a hand gun he bought while driving Nick around, Page is responsible for his own actions. Independent Contractor- a principal is usually not liable for the unauthorized torts of an independent contractor. The principle may be directly liable if she fails to exercise reasonable care in selecting an independent contractor (like hiring an alcoholic roofer). Criminal Liability of Principal Authorized Acts- the principal is liable if he directed, participated in, or approved the criminal acts of his agents. Unauthorized Acts- the principal may be liable either for a criminal act of a managerial person or under liability without fault statutes.
Agent and 3rd Persons Contract Liability of Agent Disclosed Principals- the agent is not normally a party to the contract she makes with a 3rd person if she is authorized or if the principal ratifies an unauthorized contract. Unauthorized Contracts- if an agent exceeds her actual or apparent authority, the principal is not bound but the agent may be liable for breach of warranty or for misrepresentation.
own the
Agent Assumes Liability- an agent may agree to become liable on a contract b/w the principal and a 3rd party. He can do this by: 1) making the contract in his name, 2) co-making the contract with the principle, or 3) guaranteeing that principal will perform the contract b/w the 3rd party and the principal.
Partially Disclosed Principal- an agent who acts for partially disclosed principal is a party to the contract with the 3rd party unless otherwise agreed. Undisclosed Principal- an agent acts for an undisclosed principal is personally liable on the contract to the 3rd party. Nonexistent or Incompetent Principal- a person who purports to act as an agent for a principal whom both the agent and the 3rd party know to be nonexistent or wholly incompetent is personally liable on a contract entered into with a 3rd person on behalf of such a principal.
Tort Liability of Agent Authorized Acts- the agent is liable to the 3rd party on his own torts. Unauthorized Acts- the agent is liable to the 3rd party on his own torts. Rights of Agent Disclosed Principal- the agent usually has no rights against the 3rd party. Partially Disclosed Principal- the agent may enforce the contract against the 3rd party. Undisclosed Principal- the agent may enforce the contract against the 3rd party.
Cases Case 1 Types of Authority Schoenberger v. Chicago Transit Authority Facts: Schoenberger was a worker for CTA. He was told by ZuChristian, who was in charge of recruiting for the Data Center, that Scoenberger that he desired to pay him an additional $500. It never happened and Schoenberger sued. Verdict: In favor of CTA. The trial court ruled: 1) that is was inconceivable that the plaintiff thought ZuChristian had final authority in regard to employment contracts; and 2) that it was not shown that a commitment or promise was made to the plaintiff by an authorized agent of the CTA. Case 2 Direct Liability of Principal: Negligent Hiring Connes v. Molalla Transport System, Inc. Facts: Terry Taylor was an employee of Molalla Transport System. He was a long-haul driver. When he applied for the job he had agreed that he was never convicted of a driving crime. Taylor stopped at a hotel when on a route and raped Connes who was working at the hotel. It turns out that Taylor was previously arrested for other sexual crimes in the past. Connes sued Molalla. Verdict: In favor of Molalla. Molalla had no legal duty to conduct an independent investigation into Taylor’s non-vehicular criminal background. Taylor had been instructed to sleep in the truck, not a hotel.
Case 3 Tort Liability of Principal Hulbert v. State Farm Mutual Automobile Insurance Company Facts: Hulbert were in a car accident with Dr. Murray’s nanny. In the car with the nanny was one of Dr. Murray’s children and they were behind Dr. Murray on their way to Florida for vacation. Hulbert sued Dr. Murray claiming respondeat superior. A trial court granted summary judgment to Murray. Verdict: Continue with the trial. Shortly after the accident, both Murray and the nanny told Hulbert that the nanny was going to help care for the children on vacation. One of Murray’s children was in the car with the nanny and the nanny was going to be paid for the vacation. There is a genuine issue of material fact as to whether at the time of accident if the child was with the nanny for personal or employment reasons. Case 4 Undisclosed Principal Redi-Floors, Inc. Sonenberg Co. Facts: Sonenberg managed Westchester Manor Apartments thru its on-site property manager, Judith. Manor Associates Limited Partnership, whose general partner is Westchester Manor, Ltd., owned the complex. The entry sign to the property did not reveal the owner’s name, but did disclose that Sonenberg managed the property. Judith contacted Redi-Floors to install carpet in selected units. They completed the work and received checks from “Westchester Manor Apartments”. Believing Sonenberg owned the complex, Redi-Floors did not learn of the true owner’s identity until a dispute arose concerning the payment of some of its later invoices. RediFloors sued Sonenberg, Manor Associates Limited Partnership, and Westchester Manor, Ltd. The court gave Redi-Floors $20,000 from Soneberg and Manor Associates Limited Partnership. Redi-Floors were never allowed to choose. Verdict: In favor of Redi-Floors. The trial court erred in not allowing Redi to obtain judgment from one of the defendants.
