Business Law Chapter 21

Business Law Chapter 21 - Business Law Chapter 29 Agency...

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Business Law Chapter 29 Agency The Outside Relationship Principal’s Liability For Contracts - As a general rule, a principal has no right to rescind a contract entered into by his agent - The principal is bound by the acts of an agent if: o The agent has authority o The principal, for reasons of fairness, is ESTOPPED from denying that the agent had author o The principal RATIFIES the acts of the agent - “Bound by the acts of an agent” – makes the principal as liable as if he preformed the acts himself. Also it means the principal is liable for statements the agent makes to a third party. Authority - A principal is bound by acts of agent if the agent has authority - There are 3 types of authority: express, implied, and apparent o Express and Implied fall under the category of ACTUAL AUTHORITY – an agent is authorized to act for a principal. - In apparent authority – principal is liable for actions of agent even though the agent was NOT authorized Express Authority - Express Authority – either by words or conduct, principal grants agent permission to act. - In cases of ambiguity about the principal’s intent, courts look at the principal’s OBJECTIVE manifestation, NOT his subjective intent.
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o Persons actions count, NOT their thoughts - It does not matter how the principal’s wishes are communicated, as long as the agent receives them, he/she is authorized to act. Implied Authority - Implied authority – the agent has authority to perform acts that are reasonably necessary to accomplish, an authorized transaction, even if the principal does not specify them. - The law assumes the agent has authority to do anything that is reasonably necessary to accomplish his/her task. Apparent Authority - Apparent Authority – a principal does something to make an innocent third party believe that an agent is acting with the principal’s authority, even though the agent is not authorized. - Apparent authority is when the principal has NOT authorized the agent, but has done something to make an innocent third party believe agent is authorized As a result the principal is every bit liable to the third party as if the agent DID have authority. - The law takes the view that the principal is liable, NOT the third party, because the principal, by word or deed, allowed the third party to believe that the agent was acting on the principal’s behalf. -
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Business Law Chapter 21 - Business Law Chapter 29 Agency...

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