You run a successful paper mill and send out your three best personnel to secure new wood pulp sources using due diligence and skill. Applying the agency principles outlined in this chapter, answer the following questions.
Delilah, does not return with wood pulp, but brings back three contracts. Acting within the scope of her authority, she contracted with Evon, who knew your identity at the time; Felipe, who knew that Delilah was acting on behalf of someone but not whom; and Giorgio, who did not know that Delilah was acting on anyone’s behalf.
For which contracts, if any, are you liable? For which contracts, if any, is Delilah liable? Explain.
For which contracts, if any, are you liable?
Delilah and I have what is called a principal-agent relationship; an principal-agent relationship is when the parties agree that the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties. An agent is empowered to perform legal acts that are binding on the principal and can bind a principal in a contract with a third person. In this case, I am the principal and Delilah is my agent.
I believe that we both agreed that she would act on behalf on me in negotiation and transacting business with the third parties.
Determining which who is responsible for which contracts we are liable is based on the knowledge of the principal at the time the contract was made. A partially disclosed principal is a principal whose identity is not known by the third party at the time of the transaction, but third party knows the agent is or may be acting in the place of the principal at the time of the contract is made. An undisclosed principal is when the identity is unknown at the time the transaction by the third party and they have no idea that the agent is acting as principal.