Agent’s duties to third parties - Next Generation Bar Exam

1. What is an agent's liability for its own tortious conduct committed while acting for the principal?

   The agent is personally liable, even when acting within the scope of the agency or on the principal's instructions. The principal may also be vicariously liable, but the agent is not shielded by acting for another.

2. When is an agent not liable for breach of the implied warranty of authority?

   When the third party knew the agent lacked authority, or the agent disclaimed authority. The warranty protects only third parties who reasonably believed the agent was authorized.

3. An agent signs a purchase order 'Ann Smith' without revealing that she buys for Acme Co. The seller later learns of Acme. Who may the seller hold liable if the order is not paid?

   Ann and Acme. Ann is a party because the principal was undisclosed, and Acme is liable because Ann acted with actual authority.

4. When an agent with actual or apparent authority contracts for a disclosed principal, who is a party to the contract?

   Only the principal, unless the agent and third party agree otherwise. The agent who discloses both the agency and the principal's identity is not personally bound.

5. Within his authority, Bob signs a contract 'Delta Corp., by Bob, its agent.' Delta later defaults. Who is liable to the other party?

   Delta alone. Bob disclosed both the agency and the principal's identity, so he is not a party to the contract.

6. Under the Restatement (Third), once an undisclosed principal is revealed, whom may the third party hold liable?

   Both the agent and the principal, though it may recover only once. The Restatement (Third) rejects the older rule that the third party must elect between them.

7. A person claims to be authorized to sell a company's equipment, signs a sale contract, and the company refuses to ratify. What claim does the buyer have against the person?

   Breach of the implied warranty of authority. The person is liable for the loss caused by the lack of authority.

8. When an agent contracts for an undisclosed principal, who is a party to the contract?

   The agent, and the principal if the agent acted with actual authority. The third party believed it was dealing with the agent alone, so the agent remains liable.

9. What does a person who purports to make a contract as an agent impliedly warrant to the third party?

   That the person has authority to bind the principal. The warranty is breached if the person lacks authority and the principal does not ratify.

10. When a person purports to contract for a principal that does not exist or lacks capacity, who is liable on the contract?

    The person who purported to act as agent, unless the parties agreed otherwise. There is no principal to bind, so the purported agent is treated as a party.

11. When an agent contracts for an unidentified (partially disclosed) principal, who is a party to the contract?

    Both the principal and the agent, unless they agree otherwise. The third party knows an agency exists but cannot assess the unknown principal's credit, so the agent is bound.

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