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Agency • Liability of Principal for Agent's Contracts
AG#011
Legal Definition
Revocation of actual express authority occurs by (1) a unilateral act by either the principal or the agent, or (2) death or incapacity of the principal (unless the agent was given durable power of attorney and written expression of authority to enter into a transaction).
Plain English Explanation
It's easy to grant someone actual express authority, and it is easy to take back that grant. The first is by either telling them they no longer have the power or, similarly, them telling you they no longer want it. Additionally, if someone has the power to act on your behalf, but you die, then there is no longer a "you" to act on behalf of. In other words, any power you've granted to contract on your behalf dies with you unless you have a specific type of legal agreement in place called a durable power of attorney, which grants authority to do things on your behalf even if you die.
Hypothetical
Hypo 1: Sam owns a taco cart and has one employee, Bob. Sam is planning on bringing on a large customer, Amy, and has scheduled a meeting to sign the contract. On the day of the meeting, Sam is deathly ill. Not wanting to lose the new customer, Sam tells Bob to meet with Amy and sign on his behalf. However, while Bob is driving to meet with Amy, Sam finds out Bob has been stealing money from him. Sam calls up Bob, confronts him, and fires him over the phone. Bob decides to still meet with Amy and sign the agreement. Result: The agreement is invalid. Sam revoked Bob's actual express authority by a unilateral act of firing him. The same result would have happened if Bob decided to quit.
Hypo 2: Sam owns a taco cart and has one employee, Bob. Sam is planning on bringing on a large customer, Amy, and has scheduled a meeting to sign the contract. On the day of the meeting, Sam is deathly ill. Not wanting to lose the new customer, Sam video chats with Bob to instruct him to go sign on his behalf. However, while chatting on the phone, Sam is hit by a bus, splattering into many little pieces. Bob is horrified, but decides to perform his boss's final wishes of signing the contract. Result: Bob is no longer authorized to sign. His actual express authority was revoked when Sam was killed by the bus.
Hypo 2: Sam owns a taco cart and has one employee, Bob. Sam is planning on bringing on a large customer, Amy, and has scheduled a meeting to sign the contract. On the day of the meeting, Sam is deathly ill. Not wanting to lose the new customer, Sam video chats with Bob to instruct him to go sign on his behalf. However, while chatting on the phone, Sam is hit by a bus, splattering into many little pieces. Bob is horrified, but decides to perform his boss's final wishes of signing the contract. Result: Bob is no longer authorized to sign. His actual express authority was revoked when Sam was killed by the bus.
Related Concepts
How can a principal ratify an agreement that their agent made without authority to do so?
When does an agent have actual express authority to enter into an agreement?
When does an agent have actual implied authority to enter into an agreement?
When does an agent have apparent authority to enter into an agreement?
When is an agent liable to a third party for an agreement they entered into on behalf of their principal?
When is a principal liable for contracts created by their agent?
