Watteau v. Fenwick case brief summary
FACTS
Exception – The third party may not be bound if agent made a misrepresentation.
“A general agent for an undisclosed principal authorized to conduct transactions subjects his principal to liability for acts done on his account, if usual or necessary in such transactions, although forbidden by the principal to do them.” Rest. (2d) of Agency § 194.
Narrower Rule in Third Restatement
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
FACTS
Humble,
prior owner, operated Fenwick’s tavern under Humble’s name and credit and
purchased foods from Watteau without Fenwick’s express authority. Fenwick prohibited Humble from buying goods
for the tavern, except bottled ales and mineral water; Watteau was to provide
all other goods. Humble violated
Fenwick’s prohibition by buying cigars and Bovril from Watteau. When Humble was in absentia, Watteau sued
Fenwick for the cost of the cigars and Bovril.
Actual Authority – None because Fenwick (principal) gave Humble (agent) specific
instructions not to buy anything except bottled ales and mineral water.
Apparent Authority – None because there was no holding out by the principal (Fenwick). Watteau did not know that Fenwick existed.
Inherent
Authority – Humble had apparent
authority. Fenwick is liable.
Inherent Agency
Power – “Inherent agency power is
a term used in the restatement of this subject to indicate
the power of an agent which is derived not from authority, apparent
authority or estoppel, but solely from the agency relation and exists
for the protection of persons harmed by or dealing with a servant or other
agent.” Rest. (2d) of Agency § 8A.
a.
Gap filler.
b.
Places the loss
on the enterprise that stands to benefit from the agency relationship.
RULEIf
the agent commits an unauthorized action, and there is no actual, implied, or
apparent authority, principal still may be liable for the loss based on the
notion of inherent authority.
Undisclosed Principal
A third party is bound despite not knowing about
principal. Focus is on whether an agency
relationship/authority existed between principal and agent. If so, third party is bound.
Exception – The third party may not be bound if agent made a misrepresentation.
“A general agent for an undisclosed principal authorized to conduct transactions subjects his principal to liability for acts done on his account, if usual or necessary in such transactions, although forbidden by the principal to do them.” Rest. (2d) of Agency § 194.
“An undisclosed principal who entrusts an
agent with the management of his business is subject to liability to third
persons with whom the agent enters into transactions usual in such businesses
and on the principal’s account, although contrary to the directions of the
principal.” Rest. (2d) of Agency
§ 195.
Narrower Rule in Third Restatement
§ 2.06 – Liability of Undisclosed Principal
“(1) An undisclosed principal is subject to liability to a third party
who is justifiably induced to make a detrimental change in position by an agent
acting on the principal’s behalf and without actual authority if the principal, having notice of the
agent’s conduct and that it might induce others to change their positions, did
not take reasonable steps to notify them of the facts.” (emphasis added)
“(2) An undisclosed principal may not rely on instructions given an agent
that qualify or reduce the agent’s authority to less than the authority a third
party would reasonably believe the agent to have under the same circumstances
if the principal had been disclosed.”
b.
More akin to
estoppel than old inherent agency power.
Apparent
Authority v. Inherent Authority
(Partially)
disclosed principal à requisite
manifestation by principal creates apparent authority.
Undisclosed
principal à no
communication or manifestation of authority between principal and third party à inherent authority.
Policy Rationale
– Undisclosed principal is cheapest cost avoider/in best position to avoid
loss. Cheaper for undisclosed principals
to take precautions than to require all innocent third parties to do so.
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
No comments:
Post a Comment