Principal, Agent and
Third Parties
Principal’s Liability
Principal is liable for contracts entered
into by an agent acting with authority.
Principal is liable for torts committed by
agent/ employee committed within the
scope of the employment/ agency
relationship
AGENTS AUTHORITY

Actual Authority
– Express: Authority found in the spoken
or written words communicated to agent
by principal.
– Implied:
a. Authority which agent reasonably
infers the principal intends.
b. The authority to do those things
necessary to accomplish express
authority.
AUTHORITY

Apparent Authority:
Created by words or actions of
principal causing third parties to
believe agent has authority.
Principal’s and Agent’s
Liability to Third Parties
(Contract)

Disclosed Principal:
Third party knows they are dealing
with an agent and knows the identity
of the principal.
– Principal is liable. (Assuming agent has
authority)
– Agent is not liable.
Principal’s and Agent’s
Liability to Third Parties
(Contract)


Partially Disclosed Principal :
Third party knows they are dealing
with an agent but does not know the
identity of the principal.
Principal and Agent both liable.
Principal’s and Agent’s
Liability to Third Parties
(Contract)


Undisclosed Principle:
Third party does not know they are
dealing with an agent.
Both principal and agent are liable.
LIABILITY TO THIRD PARTIES

Tort liability (page 28)
– Respondeat superior
Employer is liable for torts committed by
employees
– if within the scope of their employment.
 Criteria for determining scope of employment:
– Was the agent acting in the principal’s
interest?
– Was the agent authorized to be in the
particular place where the tort was
committed?

LIABILITY TO THIRD PARTIES
Direct Liability for agent’s tort
a. Principal directs agent to commit a
tort
b. Principal’s negligence.
Improper instructions,
Careless supervision,
Negligent hiring.
Liability for Independent
Contractor
Principal is generally not liable for
actions of independent contractors.
Exceptions: (page 31)
Negligent hiring
Nondelegable duty
Highly dangerous activities
Liability for Independent
Contractor
Negligent hiring:
Hiring an incompetent independat
contractor.
Failing to properly hire, ie. Failure to
chek background
Liability for Independent
Contractor

Nondeligable duty:
– Carriers duty to transport passangers
– Municipality’s duty to keep streets in
repair
– Railroads duty to maintain safe crossings
– Landlord’s duty to make proper repairs
Liability for Independent
Contractor
Highly dangerous activities
Excavations
Demolition
Blasting