In another example of the interrelationship between the laws you are studying, the learning activity below is representative of contractual liability and agency law. Just as an employer is bound by an employee through the concept of respondeat superior in tort liability, it is also bound to a third party by an employee through a contract (Reed, Pagattaro, Cahoy, Shedd, & Magid, 2015). There are four types of agent authority: (1) actual/express authority that occurs when principal and agent expressly agree to enter into an agency agreement; (2) implied authority that occurs or is implied from the conduct of the principal and agent; (3) apparent authority/agency by estoppel that occurs when the principal creates the appearance of an agency that does not exist; and (4) agency by ratification that occurs when a person misrepresents himself or herself as a principal's agent when in fact he or she is not and the purported principal ratifies or accepts the unauthorized act thereby making the contract binding on the principal Cheeseman, 2013). Below is the learning activity scenario for you to review and respond.


For several years, Albert acted as a collection agent for Paulette. Recently, Paulette revoked Albert's authority to collect payments from customers. However, neither Paulette nor Albert told any customers of Albert's termination. Yesterday, Theresa, one of Paulette's customers, paid Albert the money owed to Paulette. Albert never gave this money to Paulette. Is Theresa liable to pay Paulette? Why or why not?