Normally, when a representative acts on behalf of a client, the client`s legal rights are affected, but the representative is not personally liable to third parties with whom he has dealt. This lesson deals with somewhat unusual situations in which the agent may be held personally liable to third parties. Admittedly, the parties to a commercial agency contract can terminate the contract. As with the creation of the relationship, the contract can be terminated explicitly or implicitly. The modern basis of enforcement agent liability is sometimes called the “deep pocket” theory: the principal (usually a company) has deeper pockets than the agent, meaning he has the means to pay for injuries that are due in one way or another to events he has triggered. A million-dollar industrial accident is within the means of a company or its insurer; it is usually not in the means of the agent – employee – who caused it. So the test is a degree, and it`s not always easy to decide when a detour has become so big that it turns into hype. For a while, a more mechanical ruler was used to help with decision-making. The courts have taken into account the intentions of the servant in the “diversion”. If the servant`s mind was obsessed with achieving its own goals, then the detour was considered to be outside the field of activity; therefore, the offence was not attributed to the master. But if the servant also intended to carry out the intentions of his master when he left the letter of his task, or if he committed the wrong when he returned to his master`s task after his exuberance had been accomplished, then the offense was considered to be in the context of employment. Apparent authority may result from previous business transactions.
On July 10, Meggs sold the buyer his business, the right to use the trade name Rose City Sheet Metal Works, and a list of suppliers he had used. Three days later, the buyer began ordering supplies from the Central Supply Company, which was on Meggs` list but which Meggs had last processed four years earlier. On September 3, Central received a letter from Meggs informing it of the sale of the company by Meggs to the buyer. The buyer did not pay Central, which Meggs sued. The court ruled that Rose City Sheet Metal Works was apparently allowed to buy on Meggs` loan; Meggs was responsible for deliveries purchased between July 10 and September 3. Meggs v. Central Supply Co., 307 N.E.2d 288 (Ind. Appli.
1974). In such cases and in cases involving the dismissal of a managing director, all customers should be informed without delay. See the kanavos vs Hancock Bank & Trust Company discussion in section 12.4.1 “Implied Authority”. If an agent receives or pays money by mistake or fraud: If an agent pays money accidentally or fraudulently, they have the right to claim it from the recipient. If a third party accidentally or fraudulently pays money to an agent, the agent can be sued for reimbursement of the amount. 2. A representative who is not authorised to act as an agent or who has exceeded the power of attorney and has not been confirmed by the client is personally liable for damages incurred by a third party (§ 235). Example: A in the character of an agent for B makes an agreement with C to buy the house of C. A does not actually act as an agent for B, but on its own behalf. A cannot enforce the performance of the contract. But if a person does not have the power to act as an agent, or if an agent does not have the power to act in a certain way, is the principal exempt from all consequences? The answer depends on whether the representative has obvious authority within the agency in the situation in which a contracting entity leads a third party to believe that a representative is authorised to bind the contracting entity, even if the representative does not have the effective power to bind the contracting entity, i.e.
if the third party reasonably believes, by the words of the client, in writing or by speech, or by his conduct, that he has actually consented to the actions of the agent. Apparent authority is a manifestation of authority communicated to the third person; it goes from the customer to the third party, not to the agent. If the agent expressly agrees: If an agent expressly agrees to be personally liable for the contract when entering into the contract with a third party, he may be held personally liable for any breach of the contract. 6. If the agent signs a negotiable instrument in his own name without clearly indicating that he signs as an agent. A person is always responsible for his or her own criminal acts, so an officer who commits a crime is responsible; if the offence was in the context of employment, the client is also liable. Unless the principal has compelled the agent to commit the offence, the agent must indemnify the principal. In principle, an intermediary is not liable for contracts concluded; the customer is responsible. However, the Agent will be liable if it is not disclosed or is only partially disclosed, if the Agent is not authorized or exceeds it, or if the Agent has entered into the Contract in a personal capacity. At the end of the lesson, the student will be able to: 1.
Explain the general concept that an agent acts on behalf of a principal and is not personally liable to third parties with whom he has dealt. 2. Consider situations in which the representative may be held personally liable to third parties. 3. Indicate the differences between disclosed, undisclosed and unidentified principals. 4. Discuss the concept of ensuring authority and the applicant`s ability to recover. An agent is responsible for contracts entered into in a personal capacity – for example, if the agent personally guarantees the repayment of a debt. The agent`s intention to be personally responsible is often difficult to determine from his signature on a contract.
In general, a person who signs a contract can only avoid personal liability by proving that he or she has actually signed as an agent. If the contract is signed with “Jones, Agent”, Jones may present evidence demonstrating that there was never any intention to hold him personally liable. .