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Contract Liability

5 important questions on Contract Liability

The Principal (Employer) may be liable for the contracts entered into by its Agent (Employee) dependent upon two issues; (2)

A. The Authority of the Employee to act on behalf of the Employer
B. The Disclosure of the Principal (Employer) to the Third Party contracting
with the Agent (Employee).

A. What is Express Authority

Authority declared in clear, direct, and definite terms, orally or in writing ie., Power of Attorney, Real Estate Agency agreement

What is Equal Dignity Rule?

If a contract being executed by an agent on the
principal’s behalf is in writing, most states require that the agent’s
authority must also be in writing; otherwise, the contract executed by the
agent is voidable at the principal’s option.

The equal dignity rule does not apply when the agent acts in the principal’s presenceor when the agent’s act is merely perfunctory

B. What is Implied Authority?

Actual authority that is conferred by custom, from the position the agent occupies, or reasonably necessary for the job.

2. What Is an Apparent Authority?

When a Principal by words or actions causes a Third Party to reasonably
believe that an Agent has authority to act, even though the Agent has no
express or implied authority.

The question on the page originate from the summary of the following study material:

Test 5

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