The Principal’s Liability on the Contract
The Principal’s Liability on the Contract
Vicarious liability arises at the point of the imposition of the responsibility of the principal on the tortious acts of the agent. The principal is then held liable. This liability finds root from the common agency law. The agency law creates a fiduciary relationship built on trust, faithfulness and loyalty among others. The doctrine of privity in contract law normally prevents a person acquiring rights under a contract unless he is a party to it. The long established exception to that rule is the concept of agency.
Concept of agency or representation arises when the agent or the representative concludes a juristic act on behalf of the principal with the result that a legal tie is created between the principal and third party. This therefore means that all duties carried or as well as the rights acquired are for the principal. Bearing this in mind we can state the totality of juristic relationship which arising among these three parties. The terms of the contract entered by the principal agent will generally dictate the internal obligations between the principal and the agent.
For one to become an agent the following requirements should be met. First, the principal must exist. He then appoints the agent to act on his behalf. Secondly the agent must have authority to perform the act and lastly the agent must make it clear to the third party that he or she is acting for someone else and not in personal capacity. Authority to conclude a contract on behalf of the principal can either be express or implied by the law or by facts. In the event that the authority doesn’t exist then the question of liability arises and the principal or the agent is held liable. This can equally be rectified by ratification or estoppel so that the agency continues to exist.
In the scenario presented Crash agreed to have Steve represent him in various transactions as an agent to secure him performance contracts and endorsement deals. This therefore means that for the various transaction he entrusted Steve to act upon as an agent to secure him the deals he would as the principal be held liable in any event except on the occasions we will be considering below. Where an agent acts with authority and names or sufficiently identifies the principal in such a way that it is clear to the third party that the agent is acting as such, the contract is made between the principal and the third party, and the agent drops out of the transaction entirely.
Both the principal and agent have their respective duties to perform. The following are the duties of the agent: to follow instructions; duty to act properly; exercise care and diligence; duty of good faith, in this there are a split areas that calls for the agent to act in good faith these are no secrets profits acquired by the agent, conflict of interest arising, disclosure of confidential information and delegation of authority. On the other hand the principal has his own duties as follow; payment of remuneration; reimbursement and lastly indemnity. One then would want to understand as when the agent becomes liable for the actions he conducts as well as the principal? There are some actions which may be taken by the third party against the agent which are not strictly based on the contract. Examples are liability on a collateral contract, or liability for breach of the implied warranty of authority.
While dealing with Bob, Steve had express specific instruction to only make endorsement deals and not performance deal. Steve therefore failed on his duty to follow instructions and therefore acted on his own capacity as agent and is to be held liable in this case and not Crash, principal in the event that crash doesn’t attend the birthday party performance. Agency is disclosed where the agent reveals that he is acting as an agent; it is sufficient that the fact of agency is revealed without the need for the principal to be named. Agency is undisclosed where the agent does not reveal the fact of agency at all and appears to be acting on his own behalf. Where the principal is undisclosed, then it is only fair that the third party who thinks that the agent is the other party should be able to take action against the agent.
In as much as Jimmy was not aware of whom Steve was representing, the contract entered into is valid for the performance at the bar and Crash as principal ought to be liable in case of any act. This is because Steve had actual express authority to represent. On the other hand Fred can hold liable Steve liable for non-disclosure of his capacity as an agent and non-disclosure of the principal. This shows Steve’s intent of acting on his own behalf. While really acting on his own behalf, then there is no doubt that he will be liable on the contract.
In conclusion, privity of contract takes place only among the two subjects involved in a contract. It is most often seen in the contracts of sale of services or occasionally goods. There are two main types of privity, these include horizontal and vertical privity. Vertical privity usually occurs in situations where the contract is between two parties, and the two parties have an independent contract between one member of the initial contract and another individual or company. Horizontal privity on the other hand occurs when the benefits arising from a contract are supposed to be given to a certain third party.
Click following link to download this document
BA2 65 week 5 assignment The Principal’s Liability on the Contract.docx