When you finish this chapter, you should: Know when an agent has authority to bind a principal to a contract, understand when an agent may be liable on contracts s/he makes for the principal, recognize when an agent’s conduct makes a principal liable for torts committed by the agent. | Agency Law The Agency Relationship Third-Party Relations of the Principal and the Agent 8 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Third-Party Relations of the Principal and the Agent P A E T R H C 36 “We cannot all be masters.” William Shakespeare, Othello, Act 1, Scene 1 Learning Objectives Contract liability of the principal Contract liability of the agent Contract suits against principal and agent Tort liability of the principal Tort liability of the agent Tort suits against principal and agent 36 - Generally, a principal is liable on a contract made by agent if agent had express, implied, or apparent authority to make the contract Agent’s liability to third parties for a contract made on behalf of a principal depends on whether principal was disclosed (not liable) or undisclosed (liable) Contract Liability 36 - An agent’s actual authority may be express (by words) or implied (by conduct) Apparent authority arises if | Agency Law The Agency Relationship Third-Party Relations of the Principal and the Agent 8 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Third-Party Relations of the Principal and the Agent P A E T R H C 36 “We cannot all be masters.” William Shakespeare, Othello, Act 1, Scene 1 Learning Objectives Contract liability of the principal Contract liability of the agent Contract suits against principal and agent Tort liability of the principal Tort liability of the agent Tort suits against principal and agent 36 - Generally, a principal is liable on a contract made by agent if agent had express, implied, or apparent authority to make the contract Agent’s liability to third parties for a contract made on behalf of a principal depends on whether principal was disclosed (not liable) or undisclosed (liable) Contract Liability 36 - An agent’s actual authority may be express (by words) or implied (by conduct) Apparent authority arises if communications by principal to third party creates reasonable appearance of authority in the agent See Opp v. Wheaton Van Lines, Inc.: Plaintiff sued Wheaton for damages and the company alleged her ex-husband had actual or apparent authority to limit coverage Agent’s liability to third parties: Disclosed principal: agent not liable Partially disclosed principal: agents are liable Undisclosed principal: Agent is liable Example: Realtor sells celebrity’s house and does not disclose seller’s name to buyer The Work Connection, Inc. v. Universal Forest Products, Inc. Facts: Universal hired a temporary employee from Connection, a temporary employment agency Universal routinely completed Connection’s work verification forms containing language by which employer (Universal) agrees to indemnify Connection for employee injuries Injured employee was covered by Connection’s workers’ compensation insurance, but Universal refused to indemnify (pay) Connection Legal Reasoning and Holding: Trial court
