Introduction

Read the overview below and complete the activities that follow.

Agency Law in Contracts and Other Contexts

In studying the law of agency, the employer/business organization is the principal and the employee is the agent. Whether employee conduct creates liability for the employer is the usual agency issue facing businesses. Such issues may involve either torts or contracts. How is a company bound in a contract? For an employee to bind the employer to a contract negotiated with a third party, the employer must have authorized the employee's actions. The employer and the third party will be contractually bound by the employee's actions if the employee had actual, implied, or apparent authority to act on the employer's behalf.

CONCEPT REVIEW: Contractual authority can take the following forms: 1. actual authority; 2. expressed, written authority; 3. implied authority; 4. apparent authority. Actual authority arises when an employer, either verbally or in writing, instructs an employee to take certain actions. Implied authority can be inferred from the acts of an employee who holds a position of authority. Even if an employee has no express or implied authority, if the employer leads third parties to believe the employee has authority to act on the employer's behalf, the employer has conferred apparent authority upon the employee and the employer and third party will be contractually bound by the employee's actions.

Andy Tom Role over each name below to read a brief description of an employee (or former employee) entering into a contract with a third party on behalf of an employer. Determine whether the employee had actual, implied, apparent, or no authority to contractually bind the employer and third party, and drag the name accordingly. Joe Lin Jill Jim Actual Authority Implied Authority Apparent Authority No Authority Mike Pat Sue Sam Sara Jane