Comprehensive Volume, 18th Edition
Chapter 40:
Third Persons in Agency
Liability of Agent to Third Person
An agent of a disclosed principal who makes a
contract with a third person within the scope
of authority has no personal liability on the
contract.
A person purporting to act as an agent for a
principal warrants by implication that there
is an existing principal with legal capacity and
that the principal has authorized the agent to
act.
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40
If the person acting as an agent is not authorized,
he is liable for any loss caused the third person for
breach of these warranties.
Liability of Agent to Third Person
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40
An agent of a partially disclosed or an
undisclosed principal is a party to the
contract with the third person. The agent may
enforce the contract against the third person
and is liable for its breach.
To avoid problems of interpretation, an agent
should execute a contract “Principal, by
Agent.” Agents are liable for harm caused
third persons by their fraudulent, malicious,
or negligent acts.
Agents’ Signatures
Signature
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40
Responsible Party
a.
P Company, Art Smith, agent
P Company (probably i is better)
b.
Art Smith, agent for P
Company
P Company (probably)
c.
Art Smith on behalf of P
Company
P Company
d.
P Company, per Art Smith
P Company
e.
P Company, Art Smith
P Company and Art Smith
f.
Art Smith
Art Smith
g.
P Company by Art Smith
P Company (i is better)
h.
P Company
P Company
i.
P Company by Art Smith,
agent
P Company
Liability of Agent to Third Person
AUTHORIZED ACTION
Disclosed Principal
Liable
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40
Agent
Makes
Contract
Third Party
No liability on the contract
Liability of Agent to Third Person
Unauthorized Action Or Principal Without Capacity
Principal
Unauthorized Action
Third
Party
Liable
Principal
Without
Capacity
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Agent
Third
Party
Unless all material facts are
made known to third party
Unless agreement made with third
party that agent shall not be liable
Liability of Agent to Third Person
Partially Disclosed Principal
Undisclosed Principal
Agent
Agent
Makes
Liable
Contract
Liable
Third Party
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Makes
Contract
Third Party
Liability of Principal
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40
An undisclosed or a partially disclosed
principal is liable to a third person on a
simple contract made by an authorized
agent.
A principal or an employer is
vicariously liable under the doctrine of
respondeat superior for the torts (and
some crimes) of an agent or an
employee committed within the scope of
authority or the course of employment.
Liability Issues
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Status of Principal
Authority of Agent
Liability
Fully Disclosed
Principal
Full Authority
Principal
Fully Disclosed
Principal
No Authority
Agent
Partially Disclosed
Principal
Full Authority
Agent/Principal
Undisclosed Principal
Full Authority
Agent/Principal
Partially Disclosed
Principal
No Authority
Agent
Undisclosed Principal
No Authority
Agent
Sales Agents
A salesperson is ordinarily an agent
whose authority is limited to soliciting
offers (orders) from third persons and
transmitting them to the principal.
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The principal is not bound until he or she
accepts the order.
The customer may withdraw an offer at
any time prior to acceptance.