Category: Agency

What is agency by estoppel?

In an agency by estoppel a defendant will be liable to a plaintiff because the defendant’s negligence or intentional acts caused the plaintiff to reasonably rely on there being an agency relationship between the defendant and someone who purported to act on behalf of the defendant. As a general rule,  a person can bind someone else to a contract if he has authority as an agent to act on that person’s behalf.  The person on whose behalf the agent is acting is called the principal.   For example, a salesperson (agent) can bind his company (principal) to a sales contract because he has authority as an agent to represent the company.   If an agent sells a house on the owner’s (principal) behalf the  owner can’t suddenly refuse to sell the house. Naturally, the result is different if a person is not really an agent.  If a person pretends to be a salesperson for a company he can’t force the company to honor a contract – – the “salesperson”  is an imposter and no agency relationship exists with the company. Courts will apply an exception where a person or company is careless and as a result a third party reasonably relies on the existence of an agency relationship.   For example, let’s say an imposter goes around purporting to act as a salesperson for an electronics store that sells television sets.  The...

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What is agency by ratification?

Agents have the authority to act on someone else’s behalf.  For example, if Mr. Rich does not want to attend an art auction because he’s too busy counting money he could instruct Annie to go to the auction for him and bid on the art.  He’ll probably give Annie some instructions and then Annie, our agent, will have authority to bid at the auction on behalf of Mr Rich (Mr. Rich is called the principal).   If she bids successfully Mr. Rich will have to purchase the art because Annie acted with authority on his behalf. But let’s say Annie goes to the art auction and bids on some art without speaking to Mr. Rich first.  Or, let’s say she signs a contract as “Annie, agent of Mr Rich”, to purchase some art from a gallery.  She had no authority to do either action at the time so Mr. Rich does not have to purchase the art.   However, what if Mr. Rich looks the art and thinks that Annie got a good deal?  Mr. Rich then goes ahead and accepts the art, pays the money, or engages in some other action to show that he approves of what Annie did.  Even though Annie was not acting as an agent at the time, the law says that Annie was now an agent by ratification.  We will pretend to go back in time and say...

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