Question

When is a corporation liable to a third person for the act of its agent?

Answer 1

A Corporation as a principal is liable for the countracts entered into by an agent with thirs parties:

1. as long as the agent performs within his scope of authority;

2. as long as the principal-agency relationship and the principal's identity has been disclosed to the third party.

Types of authorities:

1. Express Authority- Authority granted in written form by the principal to the agent, signifying that the principal consents to the agents' actions and hence he is liable to the third parties for the agents' actions.

2. Implied Authority- the fact that an agent is supposed to carry out some implied/non spelled out tasks on behalf of the principal to execute the transaction. In this case as well, the principal is liable to the third parties for such acts.

3. Apparent authority- the fact that the third party thinks that the agent's actions have been authorized by the principal which is either directly or indirectly expressed by the principal to the third party. Thus, the party had reasonable grounds to believe so and hence, acted accordingly by adhering to the transaction with the agent. In this case, the principal cannot be freed from all responsibilities towards the third party and hence shall be liable.