Agency Contract Liability-Agency Power
Exam Questions with Complete Answers
What should first be determined when deciding whether a principal will be bound on a
contract that an agent entered into on his behalf - Answer-Whether the agent had actual
authority.
What happens to the principal if the agent did have actual authority in contract liability -
Answer-The principal will be bound regardless of whether the third party knew of the
agent's authority, and the agent cannot be held liable to the principal for breach
because he acted within he scope of his authority.
What should be determined for contract liability purposes if the agent lacked actual
authority - Answer-It should then be determined whether he had apparent authority.
What apparent authority will do to the principal and agent to a contract in contract
liability - Answer-Although apparent authority will bind the principal to the contact, the
agent may be held liable by the principal for acting outside the scope of his authority.
What actual authority is - Answer-Authority that the agent reasonably thinks he
possesses based on the principal's dealings with him.
What you should ask yourself in determining whether the actor had actual authority -
Answer-Whether the requisite formalities, if any, have been complied with; what type of
actual authority (express or implied) is present; and whether the authority has been
terminated.
Types of actual authority - Answer-Express and implied
What express authority is - Answer-That authority contained within the "four corners" of
the agency agreement, i.e., the communication, whether written or oral, from the
principal to the agent.
How the grant of authority given to an agent will be interpreted - Answer-In a fashion
similar to interpretation of offers under contract law.
How courts deal with broad grants of authority - Answer-They generally limit application
of such broad grants to what appears to be the business actually intended by the
parties.
E.g. of "extravagant" language that would appear to give extremely broad powers to the
agent - Answer-"to conduct any business on principal's behalf."
, How specific language is dealt with in the grant of authority - Answer-It will prevail over
general language
How the agent is to interpret his grant of authority - Answer-The agent is free to act
upon his grant of authority as he reasonably believes the principal intends
What the agent may look to in construing the intent of the principal - Answer-The
principal's words and acts when he conveyed authority.
What the position may be with regard to express authority that the principal did not
intend to convey but did so by mistake - Answer-It may exist.
What mistakes in relation to express authority granted mistakenly may involve - Answer-
The person to whom the authority is given; or the subject matter.
E.g. of express authority granted mistakenly - Answer-Peter wishes Chauncey to enter
into a transaction on his behalf but mistakenly tells Mary to do it. Mary has actual
express authority to act on Peter's behalf.
E.g. of express authority granted mistakenly - Answer-Peter wishes Mary to buy
Blackacre on his behalf. Mistakenly, he tells Mary to purchase Whiteacre. Mary has
actual express authority to purchase Whiteacre.
How a principal, induced by an agent to grant authority to him through
misrepresentation affects the extent of the authority actually granted. - Answer-The fact
that an agent induced the principal to grant authority by misrepresentation will not affect
the extent of the authority actually granted.
What implied actual authority is - Answer-Authority that the agent (not the third party)
reasonably believes he has as a result of the actions of the principal.
Ways in which implied authority may arise - Answer-Implied from express authority;
implied from custom and usage; implied by acquiescence; implied because of
emergency or necessity.
What express authority granted to an agent to accomplish a particular result necessarily
implies - Answer-Authority to use all means reasonably necessary for its
accomplishment.
E.g. of implied express authority - Answer-P authorizes A to manage his apartment
building. The express grant of authority states quite simply that A is "to manage" -
nothing more. To manage the building, A simply must employ a janitor, purchase fuel for
heating, arrange for the painting and repair of screens as needed, and occasionally
redecorate an apartment. The authority of A to do these thins, while not expressly
granted, is implied because these acts are necessarily incidental to the proper
management of the building.
Exam Questions with Complete Answers
What should first be determined when deciding whether a principal will be bound on a
contract that an agent entered into on his behalf - Answer-Whether the agent had actual
authority.
What happens to the principal if the agent did have actual authority in contract liability -
Answer-The principal will be bound regardless of whether the third party knew of the
agent's authority, and the agent cannot be held liable to the principal for breach
because he acted within he scope of his authority.
What should be determined for contract liability purposes if the agent lacked actual
authority - Answer-It should then be determined whether he had apparent authority.
What apparent authority will do to the principal and agent to a contract in contract
liability - Answer-Although apparent authority will bind the principal to the contact, the
agent may be held liable by the principal for acting outside the scope of his authority.
What actual authority is - Answer-Authority that the agent reasonably thinks he
possesses based on the principal's dealings with him.
What you should ask yourself in determining whether the actor had actual authority -
Answer-Whether the requisite formalities, if any, have been complied with; what type of
actual authority (express or implied) is present; and whether the authority has been
terminated.
Types of actual authority - Answer-Express and implied
What express authority is - Answer-That authority contained within the "four corners" of
the agency agreement, i.e., the communication, whether written or oral, from the
principal to the agent.
How the grant of authority given to an agent will be interpreted - Answer-In a fashion
similar to interpretation of offers under contract law.
How courts deal with broad grants of authority - Answer-They generally limit application
of such broad grants to what appears to be the business actually intended by the
parties.
E.g. of "extravagant" language that would appear to give extremely broad powers to the
agent - Answer-"to conduct any business on principal's behalf."
, How specific language is dealt with in the grant of authority - Answer-It will prevail over
general language
How the agent is to interpret his grant of authority - Answer-The agent is free to act
upon his grant of authority as he reasonably believes the principal intends
What the agent may look to in construing the intent of the principal - Answer-The
principal's words and acts when he conveyed authority.
What the position may be with regard to express authority that the principal did not
intend to convey but did so by mistake - Answer-It may exist.
What mistakes in relation to express authority granted mistakenly may involve - Answer-
The person to whom the authority is given; or the subject matter.
E.g. of express authority granted mistakenly - Answer-Peter wishes Chauncey to enter
into a transaction on his behalf but mistakenly tells Mary to do it. Mary has actual
express authority to act on Peter's behalf.
E.g. of express authority granted mistakenly - Answer-Peter wishes Mary to buy
Blackacre on his behalf. Mistakenly, he tells Mary to purchase Whiteacre. Mary has
actual express authority to purchase Whiteacre.
How a principal, induced by an agent to grant authority to him through
misrepresentation affects the extent of the authority actually granted. - Answer-The fact
that an agent induced the principal to grant authority by misrepresentation will not affect
the extent of the authority actually granted.
What implied actual authority is - Answer-Authority that the agent (not the third party)
reasonably believes he has as a result of the actions of the principal.
Ways in which implied authority may arise - Answer-Implied from express authority;
implied from custom and usage; implied by acquiescence; implied because of
emergency or necessity.
What express authority granted to an agent to accomplish a particular result necessarily
implies - Answer-Authority to use all means reasonably necessary for its
accomplishment.
E.g. of implied express authority - Answer-P authorizes A to manage his apartment
building. The express grant of authority states quite simply that A is "to manage" -
nothing more. To manage the building, A simply must employ a janitor, purchase fuel for
heating, arrange for the painting and repair of screens as needed, and occasionally
redecorate an apartment. The authority of A to do these thins, while not expressly
granted, is implied because these acts are necessarily incidental to the proper
management of the building.
