Tom, a breeder of livestock, lives in Jefferson City, Tennessee. Tom is knowledg
ID: 465422 • Letter: T
Question
Tom, a breeder of livestock, lives in Jefferson City, Tennessee. Tom is knowledgeable about cattle, but had limited means. He is, however, friendly with Ann Melon, a wealthy widow who fancies fine animals. On one or two prior occasions, Tom has purchased cattle for Ann. While visiting his friend Jack, who raises cattle in Loudon, Tennessee, Tom saw some fine specimens. Purporting to act for Ann Melon (but without any authority from her), Tom contracted to buy from Jack three bulls for the sum of $50,000. Later that same day, Tom also agreed on behalf of Ann Melon to buy from Jack a cow for the sum of $10,000. Tom paid $1,000 down on each purchase and signed each sales agreement, “Tom, Agent for Ann Melon.”
When Tom returned to Jefferson City, he told Ann of his actions, explaining that he thought he had found some good buys for her. Ann was less than enthusiastic. She had no interest in the three bulls, but agreed to buy the cow for $10,000. Tom relays the news to Jack. Upset about the series of events, Jack comes to you and asks whether he can hold Ann liable for the agreements made by Tom. What will you tell Jack?
Be sure to identify and discuss all agency issues, including (i) the difference in actual authority, apparent authority and ratification, (ii) whether Ann is liable for the contract for the cow and under what theory, and (iii) whether Ann is liable for the contract for the bulls and under what theory.
Explanation / Answer
Actual authority is the authority that the principal expressly grants to the agent, whether orally or in written,to act on behalf of him/her.Actual authority may be either expressed authority or implied authority.An agent has an apparent authority when the principal has made a representation to the third party that the agent has the authority to act for him although the agent does not infact has such authority.Ratification is when the agent possess no actual authority or apparent authority on which the third party could rely,the principal may still be liable if he ratifies the agent's acts before the third person withdraws from the contract.
In this case,Ann is liable for the contract for the cow under the theory of ratification because she agreed to buy the cow for $10000 befor Jack withdrew the contract,ratifying the contract agreement by Tom to Jack.
But Ann is not liable for the contracts for the bulls because in this agreement Tom neither possessed the actual authority or the apparent authority and there was also no ratification by Ann for the agreement