Business Law II The Principal’s Liability on the Contract Crash agrees to have S
ID: 2728448 • Letter: B
Question
Business Law II
The Principal’s Liability on the Contract
Crash agrees to have Steve represent him in various transactions as an agent to secure him performance contracts and endorsement deals.
Crash writes a letter to Bob that Steve is his agent. Unbeknownst to Bob, Crash specifically instructed Steve to only make endorsement deals with Bob. However, Steve signs a contract for Crash to attend a birthday party performance.
In all other cases, Steve has express authority to enter into any contract on behalf of Crash. So Steve makes a contract with Jimmy for a performance at a bar. Jimmy knows Steve is an agent, but he doesn’t know who Steve is an agent for.
Finally, Steve makes an endorsement contract with Fred.
Fred has no idea whether Steve is representing anyone.
Is Crash liable for any of these contracts?
Is Steve liable for any of these contracts?
Write in your own word 500 word count
Explanation / Answer
Answer
Crash agrees to have Steve represent him in various transactions as an agent to secure him performance contracts and endorsement deals.
So here Steve is agent for crash for performance contracts and endorsement deals.
(1) Crash writes a letter to Bob that Steve is his agent. Unbeknownst to Bob, Crash specifically instructed Steve to only make endorsement deals with Bob. However, Steve signs a contract for Crash to attend a birthday party performance.
To be liable, the principal must have authorized the agent in some manner to act in his behalf, and that authorization must be communicated to the third party by the principal.
On the other hand, if an agent does not have implicit authority to undertake unusual or extraordinary actions on behalf of his principal. In the absence of express permission, agent should not undertake such actions.
So here Crash is not liable for contract entered by Steve to attend a birthday party performance.
An agent who purports to make a contract on behalf of a principal, but who in fact has no authority to do so, is liable to the other party. So here Steve will be liable for contract to attend a birthday party performance.
(2) In all other cases, Steve has express authority to enter into any contract on behalf of Crash. So Steve makes a contract with Jimmy for a performance at a bar. Jimmy knows Steve is an agent, but he doesn’t know who Steve is an agent for.
Finally, Steve makes an endorsement contract with Fred. Fred has no idea whether Steve is representing anyone.
In the agency relationship, the agent’s actions in dealing with third parties will affect the legal rights of the principal. What the third party knows about the agency agreement is irrelevant to the agent’s legal authority to act. That authority runs from principal to agent. As long as an agent has authorization, either express or implied, he may bind the principal legally.
Example : Thus the seller of a house may be ignorant of the buyer’s true identity; the person he supposes to be the prospective purchaser might be the agent of an undisclosed principal. Nevertheless, if the agent is authorized to make the purchase, the seller’s ignorance is not a ground for either seller or principal to void the deal.
So Steve makes a contract with Jimmy for a performance at a bar and Steve makes an endorsement contract with Fred, Crash is liable for both these contracts.
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