Principal's Contractual Liability to Third Parties

Question 1

What is a Principal’s contractual liability to Third Parties when an Agent acts with actual authority?

Answer 1

Principal is liable on contracts when Agent acts with actual authority (express or implied).

If Principal is undisclosed – liable if, after the transaction, third party discovers Principal’s identity.

Question 2

What is a Principal’s contractual liability when an Agent acts with apparent authority?

Answer 2

A party is bound as a principal if that party’s words, acts, or failures to act cause the third party to reasonably but mistakenly believe the putative agent was authorized to act.

Apparent authority is created by Principal’s conduct, NOT Agent’s conduct.