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Security Now, Contract Liability Later

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Introduction

Read the overview below and complete the activities that follow.

Security Now, Contract Liability Later

The agency relationship is made up of a principal, and an agent acting on behalf of the principal. An array of issues arises, though, about the rights and responsibilities of principals and agents to one another, as well as to third parties. In this activity, we analyze a fictional scenario involving Security Now, a cybersecurity firm, and the University of Cambridge, one of their clients.

CONCEPT REVIEW:

By letting principals contract through their agents and thereby multiply their dealings, agency law stimulates business activity. A principal is normally liable on a contract made by his agent if the agent had express, implied, or apparent authority to make the contract. But a principal can bind herself to contracts made by an unauthorized agent through ratification.

Comprehension Case

Read the text below and answer the questions.

Suppose that Security Now, a cybersecurity firm based in Raleigh, North Carolina, just reached a deal with the University of Cambridge in Cambridge, England to enhance Cambridge's network security after a series of high-profile cyber attacks. One of Security Now's analysts, Richard, is sent to Cambridge to begin the security upgrades. Richard hits the ground running, and signs a number of agreements with Cambridge for new security systems, a practice common in the industry. Security Now instructed Richard not to make any warranties during his time in Cambridge, but Richard, wanting to make a good impression, says that "After these upgrades are complete, you'll never experience a cyber attack again." Security Now does not know about the contracts that Richard has made with Cambridge, but after learning of them decides to ratify the agreements, though Richard does not tell Security Now about one of the provisions putting liability for future cyber attacks on Security Now. Shortly after the system upgrades are complete, a massive cyber attack crashes all of the University's networks.

SA Qu. 01 Security Now refuses to pay Cambridge after the successful cyber attack...

Security Now refuses to pay Cambridge after the successful cyber attack, so Cambridge sues. Security Now argues that Richard never had authority to enter into any contracts with Cambridge in the first place, so the agreement is void. Which party has the stronger claim?