A. Agency rules establish and govern THREE relationships:
Principal <--------------------> Agent
Principal <--------------------> Third Party
Agent <-----------------------> Third Party
B. In each relationship, one party may be liable to the other based upon:
Equity Principles (usually "estoppel")
C. The relationships and liabilities are both independent and related:
The liability of one party to another is based only on the legal principles applicable to that relationship and the particular facts of the case.
A party's liability in one relationship is a factor in determining that party's rights and obligations in other relationships (e.g. an agent's liability to a third party [relationship 3 above] for breach of contract may give her a cause of action against the principal [relationship 2 above]).
A breach by one party in one relationship may cause a different party to be liable in a different relationship (e.g. an agent's breach of the agent–third party relationship may cause the principal to be liable to the third party).
D. A person may be treated as an agent for one relationship but not for others:
"Actual authority" relates to the Principal – Agent relationship.
"Apparent authority" relates to the Principal – Third Party relationship.
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