CHAPTER 12 Relationship with Third Parties

What is the contract liability of an agent who is working for a disclosed principal under an authorized contract?

Agent has no liability and is not a party to the contract he makes with the third party if:

1. agent is acting within actual and apparent authority

2. agent is working for a disclosed principal

 CHAPTER 12 Relationship with Third Parties

What is the contract liability of an agent who is working for a disclosed principal under an unauthorized contract?

An agent is liable for the contract if he exceeds his actual and apparent authority (via express or implied warranty of authority). 

Basically, the agent is liable for the contract if he misrepresents himself and shows to the third party that he has more authority than the principal gave him. The only way to be discharged from this liability is if the principal ratifies the contract. 

 CHAPTER 12 Relationship with Third Parties

How does an agent assume liability between a disclosed principal and a third  party?

An agent assumes liability between the principal and the third party, if:

1. the agent makes the contract under his own name

2. the agent co-makes the contract with the principal

3. the agent guarantees to the third party that the principal will perform the contract

 CHAPTER 12 Relationship with Third Parties

What is the contract liability of an agent who is working for an unidentified (partially disclosed) principal?

An agent is a party to the contract whether the contract is authorized or not, if he is working for an unidentified (partially disclosed) principal. 

If the agent is actually or apparently authorized to make the contract then both the agent and unidentified principal can be held liable for the contract. 

(If the agent exceeds their authority, they are liable for the contract).

 CHAPTER 12 Relationship with Third Parties

What is the contract liability of an agent who is working for an undisclosed principal?

An agent is personally liable on the contract to the third party if they are working for an undisclosed principal. 

The agent automatically is liable because the third party is unaware of the identity or the existence of a principal, therefore, it is assumed that the agent is the principal. 

 CHAPTER 12 Relationship with Third Parties

What is the contract liability of an agent who is working for a nonexistent or incompetent principal?

An agent who is aware that they are representing a corporation that does not yet exist is personally liable for the contract to the third party. 

The corporation cannot be held liable if they do not exist. If, after it comes into existence, the corporation adopts a precorporation contract then the agent is not liable.