Consider that a buyer submits the winning bid on an auction website for a handma

Question

Consider that a buyer submits the winning bid on an auction website for a handmade quilt produced by Ms. A, but taken on consignment by Mr. B, who passed the right of sale on to Ms. C who created the eBay advertisement/webpage. The quilt was shipped from Mr. B's location. The buyer, upon receipt of the quilt finds that the item is not of the quality represented in the eBay advertisement. Based on what you know now about contracts, ownership, agents, etc. post a message that explains, from your perspective, what the buyer should do applying principles of agency law

Explanation / Answer

A number of issues in the common law arise when agents make contracts on behalf of principals. Should a principal be bound when his agent makes a contract with some third party on his behalf which the principal would immediately wish to disavow? The tradeoffs resemble those in tort, so the least-cost-avoider principle is useful for deciding when contracts are valid, and may be the underlying logic behind a number of different doctrines in agency law. In particular, an efficiency explanation can be found for the undisclosed principal rule, under which the principal is bound even when the third party is unaware that the agent is acting as an agent.

The lawyer’s agent places an order with a supplier when he has been forbidden to do so; drives the principal's delivery truck into a schoolbus; hires the wrong employee for the principal's business, or sexually harasses a fellow worker. For the economist, the agency problem is how to give the agent incentives for the right action; for the lawyer, it is how to mop up the damage when the agent has taken the wrong action. The paradigmatic problem involves not just principal and agent, but a third party. The agent's misbehavior may not have any direct adverse effect on the principal. The principal is not in the schoolbus that is wrecked by the agent, and unless the law enforces the contract, he is unhurt by the agent's foolish or unauthorized purchases. Third parties are harmed, however, so government intervention can aid efficiency. When the agent takes a mistaken action, the damage must be allocated to someone---principal, agent, or third party.

THE LAW OF AGENCY The Restatement of Agency (Second) defines agency as "the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." According to authority Roscoe Steffen, The essentials of agency are few... First, the relation is a consensual one; an agent agrees, or at least consents to act under the direction or control of the principal. Second, the relation is a fiduciary one; an agent agrees to act for and on behalf of the principal. He is in no sense a proprietor entitled to the gains of enterprise--nor is he expected to carry the risks. 11 In the present article, we shall take for granted that the agent does not assume the risks of the enterprise. The problem of allocating loss from mistaken contracts is much easier when the loss can be put on the agent, but that case is relatively uninteresting because the theory is simple and the practical application is limited. Ordinarily, the loss cannot be put on the agent, either because he is not rich enough or he is a difficult target for litigation, having fled or having otherwise protected his assets from legal judgements. Moreover, while questions involving the agent's liability for contracts are interesting, much of their analysis revolved around the contract between principal and agent rather than between agent and third party, so that agency issues are secondary. The interesting cases from the point of view of agency law are thus those in which the agent has created a conflict in which the principal and some third party must share the loss, either because the efficient contract puts the risk there or because the agent lacks the resources to assume liability. The Restatement's "general principle of interpretation" says that An agent is authorized to do, and to do only, what it is reasonable for him to infer that the principal desires him to do in the light of the principal's manifestations and the facts as he knows or should know them at the time he acts.The common law provides six reasons why the principal may be bound by contracts made by the agent:

1. Actual Express Authority. The principal has entered into an explicit agreement with the agent authorizing him to take particular action. When the board of directors of a company votes to authorize the president to purchase a new office building, this is actual express authority. 2. Actual Implied Authority. The principal has entered into an explicit agreement to employ the agent, and although he has not specifically authorized the particular action at issue, the agent can reasonably infer that authority for that action has been delegated to him. If the general manager of a department store hires clerks, the store is bound by his contract even if he was not expressly granted that authority. 3. Apparent Authority. The principal has no agreement with the agent authorizing the action, but a third party could reasonably infer from the principal's conduct that the agent was authorized. If the home office tells a customer that the sales manager has authority to sell flour without confirmation, and then withdraws that actual authority without telling the customer, the sales manager still has apparent authority. This differs from actual implied authority in that apparent authority may exist even if the principal has expressly forbidden the agent's action. Apparent authority depends on the beliefs of the third party, not on the actual relation between principal and agent. 4. Estoppel. The principal is "estopped" from objecting to the agreement made by the agent if the principal could have intervened to prevent the confusion over authority; e.g., if the principal overheard the agreement being made and failed to assert that the agent was unauthorized. As one opinion puts it.

5. Ratification. If no other authority exists, but the principal agrees to the contract once he learns about it, this ratification binds the principal. If the flour salesman has no authority to sell wheat, but he makes a contract anyway, that contract is binding if the flour company agrees to it upon learning of the salesman's actions. 6. Inherent Agency Power. This concept is absent from the first Restatement of Agency. It was formally introduced in 1958 in the Second Restatement, '8a of which says, "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." The agency relationship may somehow give the agent the power to harm third parties even if there is no manifestation by the principal that the agent is acting on his behalf.19 "Inherent agency power" is the new term invented to cover this source of liability, which was already well known, but without a clear doctrinal foundation.

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