Ch. 09: Agency Liability to Third Parties and Termination – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Express Authority: Authority declared in clear, direct, and
definite terms, orally or in writing.
need written authorization.
Ch. 09: Agency Liability to Third Parties and Termination – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
IMPLIED AND APPARENT AUTHORITY
conferred by custom,
inferred from the position the agent occupies, or
an agent has authority to act with regard to the particular
matter at hand.
If the third party changes his or her position in reliance
on the principal’s representations regarding the
Ch. 09: Agency Liability to Third Parties and Termination – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
RATIFICATION
(2) the principal must know all material facts;
If the principal ratifies without full knowledge, she
can rescind her ratification, but must reimburse the
third party for any costs incurred as a result of
withdraws from the transaction; and
(6) the principal must observe the same formalities when
ratifying an agent’s act as it would have used to
authorize the act in the first place.
Ch. 09: Agency Liability to Third Parties and Termination – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
AUTHORIZED CONTRACTS
A disclosed or partially disclosed principal is liable to a third
party for a contract made by an agent who is acting within the
scope of his or her authority.
Disclosed Principal: A principal whose identity is
principal at the time the agent makes a contract with the
third party. In many states, the agent is also liable on a
contract with a partially disclosed principal.
Undisclosed Principal: When neither the fact of her agency
undisclosed principal, then the principal will generally
also be liable to the third party and will owe the agent
indemnity.
Ch. 09: Agency Liability to Third Parties and Termination – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
UNAUTHORIZED CONTRACTS
If an unauthorized agent contracts with a third party, the
principal cannot be held liable on the contract, regardless of
whether the principal was disclosed, partially disclosed, or
undisclosed. Rather, the agent will be solely liable.
However, if the third party knows or should know at the time
of the contract that the agent lacks authority – or may lack
Ch. 09: Agency Liability to Third Parties and Termination – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
E-AGENTS
E-Agent: A computer program that, by electronic or other
automated means, can independently initiate an action or
respond to electronic messages or data without a human
(2) if the e-agent does not provide the third party with
an opportunity to prevent errors at the time of the
transaction, the third party may avoid the
transaction without liability.
Ch. 09: Agency Liability to Third Parties and Termination – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
IMPLIED AND APPARENT AUTHORITY
conferred by custom,
inferred from the position the agent occupies, or
an agent has authority to act with regard to the particular
matter at hand.
If the third party changes his or her position in reliance
on the principal’s representations regarding the
Ch. 09: Agency Liability to Third Parties and Termination – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
RATIFICATION
(2) the principal must know all material facts;
If the principal ratifies without full knowledge, she
can rescind her ratification, but must reimburse the
third party for any costs incurred as a result of
withdraws from the transaction; and
(6) the principal must observe the same formalities when
ratifying an agent’s act as it would have used to
authorize the act in the first place.
Ch. 09: Agency Liability to Third Parties and Termination – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
AUTHORIZED CONTRACTS
A disclosed or partially disclosed principal is liable to a third
party for a contract made by an agent who is acting within the
scope of his or her authority.
Disclosed Principal: A principal whose identity is
principal at the time the agent makes a contract with the
third party. In many states, the agent is also liable on a
contract with a partially disclosed principal.
Undisclosed Principal: When neither the fact of her agency
undisclosed principal, then the principal will generally
also be liable to the third party and will owe the agent
indemnity.
Ch. 09: Agency Liability to Third Parties and Termination – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
UNAUTHORIZED CONTRACTS
If an unauthorized agent contracts with a third party, the
principal cannot be held liable on the contract, regardless of
whether the principal was disclosed, partially disclosed, or
undisclosed. Rather, the agent will be solely liable.
However, if the third party knows or should know at the time
of the contract that the agent lacks authority – or may lack
Ch. 09: Agency Liability to Third Parties and Termination – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
E-AGENTS
E-Agent: A computer program that, by electronic or other
automated means, can independently initiate an action or
respond to electronic messages or data without a human
(2) if the e-agent does not provide the third party with
an opportunity to prevent errors at the time of the
transaction, the third party may avoid the
transaction without liability.