3 types of express representation: Is the company responsible for the orders of fired employees?

If an employee who worked in purchasing at a company orders raw materials under the company's name from a former business partner even after being fired, does the company have to pay? This is an example that frequently appears in the agency section of the General Provisions of Civil Law. This article explains the three types of representation and abuse of representation through this example.

What is agency and unauthorized agency?

Agency is a system in which the effect of legal acts performed by an agent in the name of the principal is felt by the principal. An act done by a person without authority to act as an agent is, in principle, ineffective against the principal because it is an unauthorized act. If the principal later ratifies it, it becomes effective, and if he does not ratify it, the other party can demand performance or compensation for damages from the unauthorized agent.

In corporate transactions, this issue becomes a money issue. In transactions with large amounts, such as the cost of raw materials, either the company or the business partner incurs a large loss depending on who is responsible. Therefore, the company incurs management costs of notifying the business partner of the termination of the authority of the person who left the company.

Three types of expressive representation

For all three types, the other party is responsible only if the other party did not know that they did not have the power of attorney and was not at fault for not knowing (good faith, no fault, Article 126 is a justifiable reason). The concept is also organized in the Expressive Agency document.

긴 글을 읽을 때는 소제목만 먼저 훑어보면 전체 구조가 금방 잡히더라고요. 하루 이십 분 읽기를 정해 두는 것도 한번 챙겨보면 좋을 것 같아요.

Apply to the case of a fired employee

Party A, who was in charge of purchasing, originally had the authority to order raw materials. Since the right to representation has disappeared due to dismissal, subsequent orders are non-authorized. At this time, if Company B, which has been doing business with Company A for a long time, did not know about the dismissal and was not negligent in not knowing, express representation may be established after the termination of the right to representation under Article 129, and Company A may have to pay the price. Conversely, if Company A notified its business partners of the layoff, or if the order quantity was significantly different from usual, raising suspicion, negligence may be recognized and express representation may be denied. In the end, the small cost of notice of resignation and management of business partners prevents large payment disputes.

Defense for abuse of power of attorney

There are cases where the agent acts for his own benefit, not for the principal, while having the power of attorney. For example, if Party A ordered raw materials and planned to secretly resell them before dismissal, then there is formal agency power, but it is abuse. In this case, case law infers the proviso to Article 107, Paragraph 1 of the Civil Act, and states that if the other party knew or could have known of the agent's intention to breach the trust, it is not effective against the principal. So, the issue is whether Company C was aware of such circumstances.

How to write a case answer

Write your answer in the following order: presentation of issues → requirements → inclusion of cases → conclusion. Since the conclusions may be different for each opponent, judge B and C separately. Campus-like general provisions of civil law case analysis material can be helpful for those preparing for general provisions of civil law case-type assignments or exams in learning the flow of answer composition.