Lecture Dynamic business law - Chapter 34: Liability to third parties and termination

After studying this chapter you will be able to understand: Under what circumstances might a principal be held liable to a third party on a contract negotiated by an agent? Under what circumstances might a principal be held liable for the tortious behavior of its agent or independent contractor? How can an agency relationship be terminated?

Liability to Third  Parties and Termination

 Express Authority:  Principal explicitly instructed agent to 

perform act

 Implied Authority:  Relationship inferred from actions/conduct 

of parties; authority inferred from nature of relationship

 Apparent Authority and Estoppel:  Third party reasonably 

believes (based on actions of principal) that agency 

relationship exists between principal and another individual

Authorized Agent Acts

“Authorized” Acts:  Agent acts within scope of agent’s authority; 

disclosed, or undisclosed

Unauthorized Agent Acts

“Unauthorized” Acts:  Acts that go beyond scope of agent’s authority

Agent not liable

instructions

party, principal may be tortiously liable for agent’s misrepresentation

Questions Regarding “Course and Scope” of Employment

Independent Contractor

General Rule:  Individual who hires independent 

contractor not liable for independent contractor’s 

tortious actions under doctrine of “respondeat 

superior”, unless contractor engages in hazardous 

activities

 If agent commits crime, agent liable for crime

 If agent commits crime in scope of employment  without  authorization of principal, principal not liable for agent’s  crime

 Principal liable for agent’s crime if principal authorized  agent’s criminal act

Termination By Acts of Parties

 Lapse of Time

 Fulfillment of Purpose

 Occurrence of Specific Event

 Mutual Agreement

Termination By Operation of Law