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Contract Liability of Agents and Principals - Coggle Diagram
Contract Liability of Agents and Principals
I.
Contract Relationships of Principals, Agents, and Third Parties
-
liability of the principal
and
agent to third parties
for contracts and the
ability of third
parties to enforce contracts against principals
and agents depend on two factors:
the
type of authority
the agent had
whether the
principal
was
disclose
to the
third party.
II.
Liability of a Disclosed Principal
A.
Disclosed Principal
In this situation, the
third party
is
aware
that
the
agent is acting for
a
principal
and the
third party
knows who that
principal is.
B. Disclosed Principal with Actual Authority (Express or Implied)
the
principal only
is
liable
to the
third party
.
III.
Disclosed Principal with Apparent Authority
-here
must always
be a
disclosed principal under apparent authority
because the
authority exists
due to the
principal holding out
someone as an
agent
.
A. In this situation, the
principal only
is
liable to the third party
, but the
agent
is also
liable to the principal
for
acting as an agent without express or impli
authority.
B. Apparent Authority
—Even if
the agent lacks express or implied authority
(both being types of
“actual authority”
), the
principal
may still be
liable
for
contracts negotiated by the agent
if:
Principal held agent out as principal's agent; that is, a
third party reasonably believed
that the
agent worked
for the principal and had the autho
to
enter into contracts
;
Agent acted
within
scope of apparent authority
Third party reasonably
relied on the
appearance
in
entering into a contract.
C. Terminating Agent's Authority
—The means for terminating an agency relationship depends on the type of authority.
Terminating actual authority
—To effectively terminate an Agent's actual authority, the
Principal must end the relationship
. Termination of the
relationship
ends all actual authority
, including
express and implied authority
.
3
D. Liability of Disclosed Principal
—Agent has no Actual or Apparent Authority—In this situation, the agent only is liable to the third party; the principal ha
NO liability.
IV. Contract Liability of Partially Disclosed, and Undisclosed Principals under Actual Authority
A. Partially Disclosed Principals
If an
agent is acting for a principal
under actual authority, but
does not identify
the
principal
, then both the principal an
the
agent are liable to the third party
Real estate agents disclose
that they are
acting for a buyer
but
do not want the seller
to
know who the buyer
is
because
the seller might increase the price
if the
buyer
is a
wealthy individual or a developer.
The
agent's principal
would be
unable to obtain a fair pr for the property
if the
seller knew his or her identity.
B. Undisclosed Principals
If an
agent with actual authority does not disclose
to the
third party
the fact that he or she is
acting on behalf of a principal
, a
the third party believes the agent is acting on his or her own behalf, the
agent and principal are both personally liable on the contract.
-
However, the
damages.
C. Be sure to distinguish between the third party's right to enforce the contract and the liability of the agent and principal to the third party.
In the undisclosed principal situation, the agent is functionally a party to the contract and may enforce it against the third party.
If the agent reveals the identity of the principal or the principal decides to disclose his or her identity, then the principal can enforce the contract
against the third party.
The principal could face two situations under which the third party can refuse to perform for the previously undisclosed principal.
a. If the third party has already performed the contract for the agent, then the third party is not required to perform the same contract again
the principal.
b