1. Chapter 38 THIRD PERSONS IN AGENCY

2. Liability of Agent To Third Person
Agent who makes a contract with a third person within the scope of authority has no personal liability on the contract.
A person purporting to act as an agent for a principal warrants by implication that there is an existing principal with legal capacity and that the principal has authorized the agent to act.
If the person acting as an agent is not authorized, he is liable for any loss caused the third person for breach of these warranties.

3. Liability of Agent to Third Person
Chapter 40
AUTHORIZED ACTION
Disclosed Principal
Agent
Makes
Contract
Third Party
Liable
No liability on the contract 3

4. Liability of Agent to Third Person
Chapter 40
Unauthorized Action Or Principal Without Capacity
Third
Party
Principal
Unauthorized Action
Liable
Third
Party
Principal Without
Capacity
Agent
Unless all material facts are made known to third party
Unless agreement made with third party that agent shall not be liable 3

5. Liability of Agent to Third Person
Partially Disclosed Principal:
An agent of a partially disclosed or an undisclosed principal is a party to the contract with the third person. The agent may enforce the contract against the third person and is liable for its breach.
To avoid problems of interpretation, an agent should execute a contract “Principal, by Agent.”
Agents are liable for harm caused to third persons by their fraudulent, malicious, or negligent acts.

6. Liability of Agent to Third Person
Undisclosed Principal:
If third person is not told that a principal exists.
Third Party believes the agent is a principal and is liable on the contract.

7. Liability of Agent to Third Person
Chapter 40
Partially Disclosed Principal
Agent
Makes
Contract
Third Party
Undisclosed Principal
Agent
Makes
Contract
Third Party
Liable
Liable 4

8. Agent’s Signatures
Chapter 40 2

9. Liability of Principal For Torts and Crimes of Agent
An undisclosed or a partially disclosed principal is liable to a third person on a simple contract made by an authorized agent.
A principal or an employer is vicariously liable under the doctrine of respondeat superior for the torts (and some crimes) of an agent or an employee committed within the scope of authority or the course of employment.

10. Liability for Torts and Crimes
Employer may be liable for employee’s torts because the employer was negligent in the hiring process.
This theory has been used to hold an employer liable for intentional tort.
Employer knew or should have known that the employee was violent or dangerous.

11. Liability for Independent Contractor’s Acts
Generally, the employer is not liable for a contractor’s injury to third persons.
Exceptions to immunity.
Work is inherently dangerous.
Owner controls the work of the contractor.

12. Liability Overview Liability Issues
Chapter 40
Status of Principal
Authority of Agent
Liability
Fully Disclosed
Full Authority
Principal
Principal
Fully Disclosed
No Authority
Agent
Principal
Partially Disclosed
Full Authority
Agent/Principal
Principal
Undisclosed Principal
Full Authority
Agent/Principal
Partially Disclosed
No Authority
Agent
Principal
Undisclosed Principal
No Authority
Agent 1

13. Transactions with Sales Personnel
A salesperson is ordinarily an agent whose authority is limited to soliciting offers (orders) from third persons and transmitting them to the principal.
The principal is not bound until he or she accepts the order.
The customer may withdraw an offer at any time prior to acceptance.