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Chapter 32 Liability to Third Parties and Termination See Separate Lecture Outline System I NTRODUCTION Once a principal–agent relationship has been created, attention often focuses on the rights of third per- sons who deal with an agent.  This chapter discusses the rights of third parties when they contract with agents. A contract will make an agent’s principal liable to a third party only if the agent had authority to make the con - tract or if the principal ratified, or was estopped from denying, the agent’s acts.  In other words, liability is de- termined by a careful examination of all the facts surrounding an agency relationship. This chapter also discusses an agent’s liability to third parties in contract and tort and a principal’s li- ability to third parties because of an agent’s torts.  Again, liability is determined more by an examination of all the facts rather than looking merely at legal theory. 121
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122           INSTRUCTOR’S MANUAL TO ACCOMPANY  BUSINESS LAW , ELEVENTH EDITION The chapter concludes with a discussion of how agency relationships are terminated.  The material is generally self-explanatory and not difficult.  It may be helpful to emphasize, however, that unless termination is by operation of law, a principal must give clear notice of termination to persons who dealt with the agent.
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CHAPTER 32:  LIABILITY TO THIRD PARTIES AND TERMINATION           123 A DDITIONAL  R ESOURCES A UDIO  & V IDEO  S UPPLEMENTS The following audio and video supplements relate to topics discussed in this chapter— PowerPoint Slides To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides compiled for Chapter 32. South-Western’s Business Law Video Series The situational video  Employment Law  illustrates some of the material included in this chapter. Drama of the Law II Employer’s Duty of Care and Issues of Compensation C HAPTER  O UTLINE I. Scope of Agent’s Authority A. Express Authority Express authority is embodied in what a principal engages an agent to do.  The text discusses here the equal dignity rule (which may determine when express authority must be in writing) and powers of attorney (which “is a written document and is usually notarized”). B. Implied Authority Implied authority is conferred by custom, inferred from an agent’s position, or implied by virtue of being reasonably necessary to carry out express authority.
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