Liabilities of the Parties

Question 1

Third Party vs. Principal

Answer 1

P liable to third party on K entered into by agent IF agent had valid authority (actual, apparent, or ratified) to act.

P NOT liable to third party if no valid authority exists and act wasn’t ratified.

Question 2

Third Party vs. Agent

Answer 2

General rule: if agent had valid authority (actual, apparent, or ratified) to act on P’s behalf, agent not personally liable.

Exception: if existence and identity of P are not disclosed, Agent will be personally liable

Question 3

Disclosed Principal

Answer 3

A principal whose existence and identity are disclosed to the third party.

Disclosed principals = liable to third party.
Exceptions:
- agent liable if parties to contract intended for agent to be liable
- agent liable if no valid authority to act + damages to third party occurred for breach of an implied warranty that P existed and agent could act on P’s behalf

Question 4

Unidentified and Undisclosed Principals

Answer 4

*Unidentified principal *= third party knows of principal’s existence but not identity
Undisclosed principal = agent never reveals they’re contracting on behalf of a principal

So: agent authority + unidentified/undisclosed principal= either P or A liable

Most courts: let third party bring suit against both P and A, however if prior to the judgment, either defendant objects, third party must choose who to hold liable (either P or A)

If third party sues A in an action involving an undisclosed P, and P’s identity later becomes known = third party may sue P if judgment not satisfied.

Question 5

Third Party Liability to Principal and Agent

Answer 5

1. Disclosed Principal = only P can enforce contract
2. Unidentified + Undisclosed Principal = either P or A can enforce contract (if A sues, then P entitled to rights and benefits)

**Exceptions Where Principal Cannot Enforce Contract: ** if there has been (1) an affirmative fraudulent misrepresentation of P’s identity or (2) there’s an unforeseen increased burden to 3rd party because perfromance is due to principal and not the agent