Determining “Agency” Liability in CONTRACT

1. Determining “Agency” Liability in CONTRACT

2. Determining “Agency” Liability in CONTRACT The analysis begins with the question,

3. Determining “Agency” Liability in CONTRACT The analysis begins with the question, “Is the party seeking to enforce the contract one of the two parties who had direct dealings with one another?”

4. Determining “Agency” Liability in CONTRACT The analysis begins with the question, “Is the party seeking to enforce the contract one of the two parties who had direct dealings with one another leading to the contract?” If so, (s)he is the “third party” seeking to enforce the contract against the would-be “principal,” who was not directly involved.

5. Determining “Agency” Liability in CONTRACT The analysis begins with the question, “Is the party seeking to enforce the contract one of the two parties who had direct dealings with one another leading to the contract?” If not, the would-be “principal” is the one seeking to enforce the contract against the “third party,”with whom there was no direct dealing.

6. Determining “Agency” Liability in CONTRACT Direct dealing? Begin by asking whether there was “direct dealing” by the prospective enforcer: “Was the enforcer directly engaged in the contract’s formation?”

7. Determining “Agency” Liability in CONTRACT Direct dealing? If not, the enforcer is the would-be principal (a remote party seeking to enforce an agreement made by someone else on its behalf) and the first question should be, “Was there actual authority (to act as an agent and bind the principal) on the part of the person who did have direct dealings with the “third party?” No Actual authority?

8. Determining “Agency” Liability in CONTRACT If the 3 requirements of “actual authority” (the 3 elements of agency) have been met, then the third party may be liable to the principal, subject to certain conditions --and provided that the normal elements of contract are also satisfied. Agency authority exists onlywhere(1) one party is acting on behalf of another (2) by mutual consent and (3) subject to the controlof that other. Direct dealing? No $ Actual authority? Yes Liability $

9. Determining “Agency” Liability in CONTRACT Direct dealing? No $ If there is no actual authority, look to see if the would-have-been “principal” qualifies under contract law as a “third-party beneficiary.” Actual authority? Yes Liability $ No 3d party Beneficiary?

10. Determining “Agency” Liability in CONTRACT Direct dealing? No If so, there may still be liability under straight contract law (though not agency law). Actual authority? Yes $ No 3d party Beneficiary? Yes Liability $

11. Determining “Agency” Liability in CONTRACT Direct dealing? If not, there is no contractual liability, and the attempt by the party who was not a direct participant in the making of the contract (the “principal”) is at an end. In the terms of contract law, there is no privity of contract. No Actual authority? Yes $ No 3d party Beneficiary? Yes Liability $ No

12. Determining “Agency” Liability in CONTRACT Next, the analysis turns to enforcement against the would-be principal by the “third party,” who had direct dealings with the would-be “agent.” Once again, the first question is, “Was there ‘actual authority’ given by the would-be ‘principal’ to the ‘agent?’ ” Direct dealing? Yes Actual authority? No Actual authority? Yes $ No 3d party Beneficiary? Yes Liability $ No

13. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? If, again, the 3 requirements of “actual authority” have been met, then the principal is liable to the third party, provided that the normal elements of contract have been satisfied. No Yes Actual authority? Yes $ No 3d party Beneficiary? Yes Liability $ No

14. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? No Yes If not, the question of liability is still not resolved, and the next line of inquiry depends on whether or not the third party relied on a “principal” who had been disclosed to the third party. Actual authority? Yes $ No 3d party Beneficiary? Yes Liability $ No

15. Determining “Agency” Liability in CONTRACT If there was no reliance on a disclosed principal, the next question is whether the party with whom the third party actually contracted was a general agent -- or merely a special agent -- or no agent at all. A general agent is one who has more than a one-time or short-term relationship with a principal and the authority to do a variety of things for the principal. Direct dealing? Yes Actual authority? No Disclosed Principal? No Yes No Actual authority? General agent? Yes $ No 3d party Beneficiary? Yes Liability $ No

16. Determining “Agency” Liability in CONTRACT If that person was a general agent, the inquiry has one more step: “Was the general agent acting within the scope of his/her/its inherent power?” Was the general agent’s act -- though not in fact authorized -- the sort of thing that normally a person in that position would be authorized to do? Direct dealing? Yes Actual authority? No Disclosed Principal? No Yes No Actual authority? General agent? Yes $ Yes No 3d party Beneficiary? Yes Inherent power? Liability $ No

17. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? No Yes No Actual authority? General agent? If the general agent was acting within thescope of inherent power and the 3d party was unaware of the lack of authority, there may be liability. Yes $ Yes No 3d party Beneficiary? Yes Yes Inherent power? Liability $ No

18. The analysis now turns to disclosed “principals”(not actual principals, because this analysis assumes the absence of “actual authority”). Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? No Yes No And the first question is whether the 2 requirements of “apparent authority” can be met: (1) a reasonable belief that the “agent” was actually authorized to make the agreement on the “principal’s” behalf and (2) that belief was based in some measure on some manifestation (appearance) attributable to the “principal.” Actual authority? General agent? Yes $ Yes No 3d party Beneficiary? Yes Yes Inherent power? Liability $ No

19. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes Liability No Yes No If both requirements of “apparent authority” are met (and the transaction meets the other requirements of contract law), the “principal” may be held liable as though he/she/it were a real principal. Actual authority? General agent? Yes $ Yes No 3d party Beneficiary? Yes Yes Inherent power? Liability $ No

20. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes Liability No Yes No No Actual authority? General agent? Agency by Estoppel? Yes $ Yes No If not, the inquiry continues with the question whether the 2 requirements of “agency by estoppel” can be satisfied: (1) a reasonable belief the agree-ment was authorized and (2) an unreasonable failure by the “principal” to prevent the harm to the 3d party. 3d party Beneficiary? Yes Yes Inherent power? Liability $ No

21. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes $ No Yes No No Liability Actual authority? General agent? Agency by Estoppel? Yes Yes $ $ Yes No 3d party Beneficiary? Yes Yes Inherent power? If “agency by estoppel” can be established, there may again be liability despite the absence of any actual authority. Liability $ No

22. Whether or not the the “principal” is disclosed, has he/she/it acted in such a way as to ratify the actions of the “agent” in binding the “principal” to the third party in contract? Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes $ No Yes No No Liability Actual authority? General agent? Agency by Estoppel? Yes Yes $ $ Yes No No No 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability No $ No

23. If ratification has occurred, the “principal” is deemed liableas of the date of the original agreement between the “agent” and the third party. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No $ Actual authority? General agent? Agency by Estoppel? Yes Yes Liability $ Yes No $ No No Yes 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability No $ No

24. Even where there has been no ratification, there are still possibilities of adoption or novation. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No $ Actual authority? General agent? Agency by Estoppel? Yes Yes Liability $ Yes No $ No No Yes 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability No $ No No Adoption or Novation?

25. Adoption of the agreement between the “agent” and the third party or novation (an entirely new agreement directly between the “principal” and the third party) will bind those parties only as of the date of the adoption or novation. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation?

26. If there is no adoption or novation, there is no liability, and the “third party” has run out of options for holding the “principal” liable Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No

27. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No

28. Analysis for “principal” trying to enforce agreement made by “agent” with third party. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No

29. Analysis for “third party” trying to enforce against the “principal” an agreement made with an “agent”. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No

30. Quasi-agency liability concepts: General agent for undisclosed principal (or where no reliance on a disclosed principal), acting within the scope of Inherent Power. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No

31. Quasi-agency remedial concepts for disclosed “principals”:Apparent Authorityand Agency by Estoppel. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No

32. “Agency” after the fact, for disclosed or undisclosed “principals”:Ratification and Adoption. Determining “Agency” Liability in CONTRACT Direct dealing? Yes Actual authority? No Disclosed Principal? Yes Apparent agency? Yes No Yes No No Yes Actual authority? General agent? Agency by Estoppel? $ Yes $ Yes No No No Liability 3d party Beneficiary? Yes Yes Inherent power? Ratification? Liability Yes $ No $ No No Yes Adoption or Novation? No