Exam 29: Relationship With Third Parties

Under the general rule of the Third Restatement, death of a principal terminates all authority of an agent, including apparent authority, even though no notice is given to third parties.

The court in the Schoenberger v. Chicago Transit Authority case held that:

Paul, acting without authority, makes a contract with Ed, supposedly on behalf of Shawna. Shawna may ratify the contract, even if Ed loses contractual capacity before she ratifies the contract.

a. What is an undisclosed principal? b. What is a partially disclosed principal? c. What liability does an agent have to a third party when the principal is either undisclosed or partially disclosed? d. Dale is asked to be an agent for Phil, but Phil does not wish third parties to know that Dale represents him. In light of your answer to part (c), why would Dale want to be an agent for Phil? Why would Phil wish that third parties not know his identity? Explain.

Discuss the fundamental rules of contractual liability between a principal and the third party.

The contractual liability of the principal may depend upon whether the principal is disclosed, partially disclosed, or undisclosed.

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

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.

Respondeat superior :

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

Paul is a truck driver who owns his own truck and delivers loads to various companies for nine months out of the year. For the hard winter months, Paul goes to Key West to "put his feet in the sand." One evening while delivering a load for Emblem Helicopter Parts Co., Paul got into a "little scuffle" with a rowdy trucker who was giving Nell, a waitress at the DewDrop Inn Cafe, a hard time. Paul knocked out five of "Rowdy's" teeth. Rowdy is suing Paul and Emblem for his injuries. Discuss whether Rowdy will win against Emblem on the issue of: (a) respondeat superior and (b) unauthorized acts of agents.

An agent is not normally liable on a contract he makes with a third party on behalf of a(n):

Sam is a sales representative for the Incman Corporation. Sam has a terrible driving record and has had his driver's license revoked, but nevertheless he continues to drive the company car for his job. One day he drives too fast for conditions, goes through a red light, and strikes a pedestrian. The accident happened despite the fact that Sam's supervisor at Incman had repeatedly reprimanded him and advised him to drive more cautiously. Incman:

A principal is contractually bound to a third party if the agent acts without any authority but the principal ratifies the contract.

The court in Connes v. Molalla Transport System, Inc. found:

Under the rule of the Third Restatement, if a principal becomes incapacitated, the agency relationship terminates and all authority ceases.

The doctrine of respondeat superior is most often applied in situations involving:

Ratification may relate to acts that have exceeded the authority granted to an agent.

Apparent authority may arise by an agent's showing a third party a document from the principal authorizing the agent to enter into such a transaction.

An agent who makes a contract for a disclosed principal whose contracts are voidable for lack of contractual capacity: