How can apparent authority be terminated

Joel v. The plaintiff was run over on a highway by a speeding cart and horse. The driver was the employee of another, and inside was a fellow employee. There was no question that the driver had acted carelessly, but what he and his fellow employee were doing on the road where the plaintiff was injured was disputed. For weeks before and after the accident, the cart had never been driven in the vicinity in which the plaintiff was walking, nor did it have any business there.

The suggestion was that the employees might have gone out of their way for their own purposes. The test is thus one of degree, and it is not always easy to decide when a detour has become so great as to be transformed into a frolic. For a time, a rather mechanical rule was invoked to aid in making the decision. This test is not always easy to apply.

If a hungry deliveryman stops at a restaurant outside the normal lunch hour, intending to continue to his next delivery after eating, he is within the scope of employment. But suppose he decides to take the truck home that evening, in violation of rules, in order to get an early start the next morning.

Suppose he decides to stop by the beach, which is far away from his route. Does it make a difference if the employer knows that his deliverymen do this? That is, the employer is within the zone of risk if the servant is in the place within which, if the master were to send out a search party to find a missing employee, it would be reasonable to look. See Section 4, Cockrell v. Vicarious liability is not limited to harm caused in the course of an agency relationship.

It may also be imposed in other areas, including torts of family members, and other torts governed by statute or regulation. We will examine each in turn. A problem commonly arises when an automobile owner lends his vehicle to a personal friend, someone who is not an agent, and the borrower injures a third person.

Is the owner liable? In many states, the owner is not liable; in other states, however, two approaches impose liability on the owner. The second approach to placing liability on the owner is judicial and known as the family purpose doctrine A doctrine under which an owner of an automobile is liable for damages to others incurred while members of his family are driving the vehicle, under the theory that the vehicle is owned for family purposes.

Under this doctrine, a family member who negligently injures someone with the car subjects the owner to liability if the family member was furthering family purposes. These are loosely defined to include virtually every use to which a child, for example, might put a car. In a Georgia case, Dixon v. Phillips , the father allowed his minor son to drive the car but expressly forbade him from letting anyone else do so.

Dixon v. Phillips , S. Nevertheless, the son gave the wheel to a friend and a collision occurred while both were in the car. The court held the father liable because he made the car available for the pleasure and convenience of his son and other family members.

At common law, the husband was liable for the torts of his wife, not because she was considered an agent but because she was considered to be an extension of him. Holmes, Agency , 4 Harvard Law Rev. However, they can be held liable for failing to control children known to be dangerous. Most states have statutorily changed the common-law rule, making parents responsible for willful or malicious tortious acts of their children whether or not they are known to be mischief-makers.

Several other states impose a monetary limit on such liability. There are certain types of conduct that statutes or regulation attempt to control by placing the burden of liability on those presumably in a position to prevent the unwanted conduct.

Another example involves the sale of adulterated or short-weight foodstuffs: the employer of one who sells such may be liable, even if the employer did not know of the sales. A principal will, however, be liable if the principal directed, approved, or participated in the crime. There is a narrow exception to the broad policy of immunity. These include pure food and drug acts, speeding ordinances, building regulations, child labor rules, and minimum wage and maximum hour legislation.

Misdemeanor criminal liability may be imposed upon corporations and individual employees for the sale or shipment of adulterated food in interstate commerce, notwithstanding the fact that the defendant may have had no actual knowledge that the food was adulterated at the time the sale or shipment was made. This is the master-servant doctrine or respondeat superior. Special cases of vicarious liability arise in several circumstances. For example, the owner of an automobile may be liable for torts committed by one who borrows it, or if it is—even if indirectly—used for family purposes.

Similarly by statute, the sellers and employers of sellers of alcohol or adulterated or short-weight foodstuffs may be liable. The employer of one who commits a crime is not usually liable unless the employer put the employee up to the crime or knew that a crime was being committed.

That a principal is held vicariously liable and must pay damages to an injured third person does not excuse the agent who actually committed the tortious acts. A person is always liable for his or her own torts unless the person is insane, involuntarily intoxicated, or acting under extreme duress.

The agent is personally liable for his wrongful acts and must reimburse the principal for any damages the principal was forced to pay, as long as the principal did not authorize the wrongful conduct. The agent directed to commit a tort remains liable for his own conduct but is not obliged to repay the principal.

Liability as an agent can be burdensome, sometimes perhaps more burdensome than as a principal. In the absence of insurance, an agent is at serious risk in this lawsuit-conscious age. The risk is not total. The agent is not liable for torts of other agents unless he is personally at fault—for example, by negligently supervising a junior or by giving faulty instructions. For example, an agent, the general manager for a principal, hires Brown as a subordinate.

Brown is competent to do the job but by failing to exercise proper control over a machine negligently injures Ted, a visitor to the premises. The principal and Brown are liable to Ted, but the agent is not. It makes sense that an agent should be liable for her own torts; it would be a bad social policy indeed if a person could escape tort liability based on her own fault merely because she acted in an agency capacity.

No public policy would be served by imposing liability, and in many cases it would not make sense. The agent personally could not reasonably perform such contract, and it is not intended by the parties that she should be liable. Although the rule is different in England, where an agent residing outside the country is liable even if it is clear that he is signing in an agency capacity. But there are three exceptions to this rule: 1 if the agent is undisclosed or partially disclosed, 2 if the agent lacks authority or exceeds it, or 3 if the agent entered into the contract in a personal capacity.

We consider each situation. An agent need not, and frequently will not, inform the person with whom he is negotiating that he is acting on behalf of a principal. A real estate developer known for building amusement parks wants to acquire several parcels of land to construct a new park. He wants to keep his identity secret to hold down the land cost. If the landowners realized that a major building project was about to be launched, their asking price would be quite high. So the developer obtains two options to purchase land by using two secret agents—Betty and Clem.

Betty does not mention to sellers that she is an agent; therefore, to those sellers the developer is an undisclosed principal. Thus the developer is, to the latter sellers, a partially disclosed principal. Suppose the sellers get wind of the impending construction and want to back out of the deal. Who may enforce the contracts against them? The developer and the agents may sue to compel transfer of title. The undisclosed or partially disclosed principal may act to enforce his rights unless the contract specifically prohibits it or there is a representation that the signatories are not signing for an undisclosed principal.

Now suppose the developer attempts to call off the deal. Whom may the sellers sue? Both the developer and the agents are liable. If the sellers first sue agent Betty or Clem , they may still recover the purchase price from the developer as long as they had no knowledge of his identity prior to winning the first lawsuit. The developer is discharged from liability if, knowing his identity, the plaintiffs persist in a suit against the agents and recover a judgment against them anyway.

Similarly, if the seller sues the principal and recovers a judgment, the agents are relieved of liability. 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.

The theory is that the agent has warranted to the third party that he has the requisite authority. The principal is not liable in the absence of apparent authority or ratification. But the agent does not warrant that the principal has capacity. Thus an agent for a minor is not liable on a contract that the minor later disavows unless the agent expressly warranted that the principal had attained his majority.

In short, the implied warranty is that the agent has authority to make a deal, not that the principal will necessarily comply with the contract once the deal is made. An agent will be liable on contracts made in a personal capacity—for instance, when the agent personally guarantees repayment of a debt.

Generally, a person signing a contract can avoid personal liability only by showing that he was in fact signing as an agent. This can be troublesome to agents who routinely indorse checks and notes. There are special rules governing these situations, which are discussed in Chapter 22 "Liability and Discharge" dealing with commercial paper. The agency relationship is not permanent. Either by action of the parties or by law, the relationship will eventually terminate.

Certainly the parties to an agency contract can terminate the agreement. As with the creation of the relationship, the agreement may be terminated either expressly or implicitly. Many agreements contain specified circumstances whose occurrence signals the end of the agency. Mutual consent between the parties will end the agency. Even a contract that states the agreement is irrevocable will not be binding, although it can be the basis for a damage suit against the one who breached the agreement by revoking or renouncing it.

As with any contract, a person has the power to breach, even in absence of the right to do so. If the agency is coupled with an interest, however, so that the authority to act is given to secure an interest that the agent has in the subject matter of the agency, then the principal lacks the power to revoke the agreement. There are a number of other circumstances that will spell the end of the relationship by implication. However, an agency may be made irrevocable by statute, notwithstanding the death of the principal.

Regarding the termination of the agency upon the death of the principal, two views are prevailing. According to one view, unless the agency is one coupled with an interest, it will terminate on the death of the principal, notwithstanding the fact that the agent and third person are ignorant of the fact.

The loss of capacity of a party resulting from temporary or permanent mental incompetency may result in the termination or suspension of the agency relationship. Similarly, the bankruptcy of the principal is a valid reason for the termination of agency and the agent is divested of any authority to deal with any assets or rights of property of which the principal was divested by reason of the bankruptcy, irrespective of whether the agent receives notice of the bankruptcy.

A power of attorney may be terminated by the bankruptcy of the principal. Similarly, a change in the legal identity of, or merger by, the principal is a valid ground for termination of an agency contract. However, destruction of subject matter will not always result in the termination of the agency, especially when the subject matter can be replaced without substantial detriment to either party [xii]. In addition, a change of law making the required act illegal may terminate an agency contract.

If the authority or power of an agent is coupled with an interest, it is not revocable by the act, condition, death, or mental incapacity of the principal before the expiration of the interest, unless there is some agreement to the contrary.

Power is coupled with an interest where the agent receives title to all or a part of the subject matter of the agency.

In order to support a claim of power coupled with an interest, either legal title or equitable title is sufficient. Sayani v Bright Bros P Ltd , AIR Mad Where an agency has been created for a fixed period, compensation would have to be paid for its premature termination, if the termination is without sufficient cause. Reasonable notice for premature determination of agency was not given. The agent was earning Rs. A compensation of Rs. The principal died before the agent could complete the bill.

Where the agency was to run a petrol pump for a specific period, it was held that the agent was bound to vacate the premises on expiry of the period. There was no renewal clause, nor in fact, there was any renewal.

The court repelled the contention that it was very unreasonable to expect that the principal should inform the whole world that he has canceled the power of attorney given to his agent and that he cannot be expected to approach everybody with whom the agent was likely to enter into a contract and inform him of the cancellation.

Third parties who are unaware of the termination may reasonably believe that an ex-agent still has authority. Thus, a former agent may be able to bind the principal under his apparent authority even though the agency has ended. Apparent authority ends only when the third party receives appropriate notice of the termination, that is, when it is no longer reasonable for a third party to believe that the agent has actual authority.

Some bases for termination by operation of law such as changed circumstances may provide such notice. When third parties do not have noticed that the principal has died or lost capacity, they may reasonably believe the agent to be authorized. To protect themselves against unwanted liability, however, prudent principals will want to notify third parties themselves. The required type of notification varies with the third party in question. For third parties who have previously dealt with the agent or who have begun to deal with the agent, actual notification is necessary.

This can be accomplished by-. For all other parties, constructive notification Usually, these other parties are aware of the agency but did no business with the agent.

If no suitable publication exists, notification by other means reasonably likely to inform third parties—for example, posting a notice in public places or at a website—may be enough.

It also is well settled that the party who has breached the contract and has by his conduct exhibited the traits of having abandoned or renounced the obligations under the contract will not be entitled to claim damages from the other side [xv]. The relation of principal and agent can only be terminated by the act or agreement of the parties to the agency or by operation of law. Agency may be terminated by subsequent events. These may be physical, as where, for example, the subject matter is destroyed, or the principal or agent dies or becomes insane.

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The materials contained within this website provide general information about the Trembly Law Firm, do not constitute legal advice and are intended for informational purposes only. Click here for full disclaimer. In Georgia, the doctrine of apparent authority "is based upon the principle that where one of two innocent parties must suffer from the wrongful act of another, the loss should fall upon the one who, by his conduct, created the circumstances which enabled the third party to perpetrate the wrong and cause the loss.

The doctrine of apparent authority comes up often in agency law. Under agency law, apparent authority is defined as an agent having the authority to act on behalf of a principal when if manifestations of the principal to a third party would lead a reasonable third party to believe that the principal authorized the agent to act. If an agent has apparent authority and acts within the scope of the authority, then the principal is bound by the agent's actions.

Quite often, the same situation that grants apparent authority will also necessarily grant actual authority. In American Soc'y of Mech. Eng'rs v.