Exam 29: Relationship With Third Partiespart Vii: Business Associations

A principal may be liable where his agent sells liquor to an underage person even though the principal did not authorize the act.

Which of the following is true regarding an agent who is acting for an undisclosed principal?

Which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?

The principal may ratify either the entire contract or the part that is advantageous to the principal.

In general, an undisclosed principal and the third party to a contract are contractually bound if the agent acts within the scope of his actual authority in making the contract.

Edward is hired to manage Fred's business.Which of the following is untrue regarding Edward's authority?

Southern Furniture Co.hired Chuck to drive a company truck and deliver furniture.Chuck had a spotless driving record and did well on his driving test.Belinda ordered a chair from Southern Furniture Co.and arranged for its delivery on her lunch hour.Belinda was at home when Chuck delivered the chair.After delivering the chair, Chuck brutally raped Belinda, causing severe physical and psychological injuries.Chuck was convicted in the criminal courts.During the trial it was revealed that Chuck had been in a mental institution for the criminally insane for two years because he had brutally assaulted his mother and other women.He also had a lengthy criminal rap sheet involving theft crimes.Belinda sought compensation for her physical and psychological injuries from both Chuck and Southern Furniture Co.in civil court.Discuss what the probable outcome of this case would be with regard to the issues of: (a) respondeat superior and (b) general tort liability of principals for the unauthorized acts of their agents.

Name the two basic types of authority with regard to agents and explain the difference between them.

Usually in cases where there is a known principal, the agent has liability for, and rights under, contracts made on behalf of a principal.

Rena employs James, a real estate broker, to find a buyer for her home for a price of at least $125,000.James has the actual implied authority to contract for the sale of Rena's home.

Discuss whether the principal is liable in each of the following situations. a.Patricia hires Andrew, an attorney, to negotiate a contract to purchase some property.She agrees to pay him $75 an hour for his services, and he agrees to use his own office and secretarial staff to negotiate and draft the agreement.One day, Andrew is driving his own automobile to a meeting with Edward to discuss the purchase of the land that he owns.Andrew drives too fast for conditions and has a minor traffic accident that results in $600 damage to the other vehicle. b.Mel owns a retail store.He hires Sarah to work for him as a clerk in the home furnishings department.Mel instructs Sarah to make certain representations to customers regarding a microwave oven.Mel knows these misrepresentations are false, but Sarah does not.Henrietta buys a microwave from Sarah in reliance on the misrepresentations. ​ c. ABC Inc.hires Keith as an outside salesman and instructs him to call on customers in a specified territory and to solicit orders for its products.One day Keith is driving the company car a little too fast for conditions on his way to call on a client.He accidentally drives the wrong way on a one-way street and has an accident with another vehicle that results in $6,000 in property damage and $30,000 in medical expenses. ​ d. The A & B Machine Company (ABMC) hires John as an outside salesman for its computers.It sets high sales quotas for him and instructs him to beat up salesmen from competing firms in order to keep them away from ABMC customers.In order to meet his monthly sales quota, John roughs up Ralph, who is a salesman for a competing firm and then tells Ralph to find his own customers and to stay away from John's territory.

In the Parlato v.Equitable Life Assurance Society of the United States case, the court held:

Upon the termination of an agency, the agent's actual authority ceases.However, apparent authority may continue until actual notice of the termination is given to third parties.

Richard writes a letter to Sarah authorizing her to sell his car and sends a copy of the letter to Saxton, a prospective purchaser.The next day, Richard sends a letter to Sarah revoking her authority, but he fails to notify Saxton .Sarah:

Selene is planning to incorporate a new landscaping company, "Evergreen and Growin'." She has held herself out as an agent for Evergreen and has contracted to buy a truck, tools, fertilizer, and seed and also has entered into a lease on behalf of Evergreen for an office.When she fails to get the loan from the bank, she cannot start the business, so she cancels all the contracts.What are the consequences?

No apparent authority exists where the third party knows that the agent has no actual authority.

Gary hires Doug to burn off his fields to kill the weeds.If the fire gets out of control because of Doug's negligence and the fire damages Philip's wood fence:

Apparent authority arises out of words or conduct of a disclosed or unidentified (partially disclosed) principal manifested to third persons.

A person may ratify a prior unauthorized act and may later revoke the ratification.

An agent who has either actual or apparent authority has the power to bind his principal.