Liability of the Principal and Agent to Third Parties

Question 1

Liability for a Partially Disclosed Principal

Answer 1

Both the agent and the principal are liable on a contract entered into by an authorized agent on behalf of a partially disclosed principal.

Question 2

Liability for an Undisclosed Principal

Answer 2

An undisclosed principal is not liable when his agent acts for an improper purpose, or for the third party’s purpose.

Question 3

Liability or a Disclosed Principal

Answer 3

A disclosed principal is liable when his agent acts for an improper purpose, or for the third party’s purpose, unless the third party has notice that the agent is not acting for the principal’s benefit.

Even if the principal gives an agent secret limiting instructions, if the agent acts beyond the scope of the limitations when dealing with a third party, the principal will be bound by the agent’s actions.