Principal's Liability for Contract Breach

This page includes a writing template for analyzing this topic and usage notes to guide its application. In general, the template is designed to serve as a starting point for your analysis. It should be adapted to fit the specific facts of your case and your professor’s preferences.

Writing Template

Issue

I: The issue is whether the principal is liable for the agent’s actions when the claim is based on contract law.

Analysis

R: The principal is contractually liable to a third party for the acts of an agent with (1) actual or (2) apparent authority or if the principal (3) ratifies the contract. Further, the principal may be (4) estopped from denying liability.

A: Here, [state the relevant theory of liability and provide facts supporting its relevance].

[Relevant Theory of Liability]

R: [Insert rule of the relevant theory of liability from the list below.]

A: Here, [apply rule to facts].

C: Therefore, [relevant theory of liability] [is/is not] satisfied.

Conclusion

C: Therefore, the principal [is/is not] liable for the agent’s actions when the claim is based on contract law.

Theory of Liability Options

The template above mentions four possible theories that may be used to establish the principal’s liability for a breach of contract: (1) actual authority, (2) apparent authority, (3) ratification, or (4) estoppel. The analysis for each is listed below and may be inserted into the template when it is relevant to the facts. (Note: There are two types of actual authority.)

Actual Authority

R: Actual authority arises when the principal grants authority to the agent, either (1) expressly or (2) impliedly. The principal has (1) express actual authority over the agent when they give direct and specific instructions to the agent to carry out a contract. The agent must subjectively believe they are acting as the principal intended, and this belief must be objectively reasonable under the circumstances. The principal has (2) implied actual authority agent is granted authority based on the reasonable belief that certain actions are necessary to achieve the principal’s objectives. This can arise from the agent’s role within the organization or customary business practices.

Apparent Authority

R: Apparent authority arises when a third party reasonably believes that the agent has the authority to act on behalf of the principal, based on the principal’s conduct or representations. This belief must be reasonable, and the third party must lack notice that the agent does not have actual authority.

Ratification

R: Ratification occurs when the principal, after becoming aware of the material facts of the agent’s unauthorized act, affirms or adopts the agent’s actions. This can occur explicitly (e.g., through words or actions) or implicitly (e.g., by accepting benefits under the contract).

Estoppel

R: Estoppel arises when the principal’s actions or omissions cause a third party to reasonably rely on the agent’s authority, to the third party’s detriment. If the principal negligently creates the impression that the agent has authority, the principal is estopped from denying liability.

Usage Notes

JurisJotter templates synthesize legal principles into a practical format that supports the development of well-structured, point-rich analyses in a timed exam.

The template features (1) headers identifying the overall issue, analysis, and conclusion. If the analysis begins with an umbrella rule that identifies elements, factors, or steps of the analysis, it will be followed by subheaders that signpost the analysis of each component.

The template also features (2) IRAC labels at the beginning of each paragraph. These headers and labels are included for educational purposes, offering guidance on structuring your analysis. Your usage of the headers is optional but can be helpful to readers. We advise against including the IRAC labels in submitted work.

The templates serve as a general guide for writing and should be adapted to align with (1) your specific factual circumstances and (2) your professor’s preferences, particularly if your professor provides explicit formulations of rules or analyses. For example, you may add or subtract an element or modify its language. Regardless of whether your professor provides explicit formulations, (3) this template will assist you in crafting point-rich analyses.

Please note that these templates are writing aids and not finished products. They are efficiently designed for exam essays to demonstrate conceptual understanding; thus, they are not comprehensive outlines with historical context or dicta.

Questions or comments? Reach out at [email protected].