Black-letter propositions
- 01
A disclosed principal is ordinarily liable and the authorized agent is not a party.
- 02
When the principal is unidentified or undisclosed, the agent is ordinarily liable, and the principal may also be liable if the act was authorized.
- 03
An agent purporting to act for a principal impliedly warrants authority and can be liable when authority is absent.
- 04
A third party can elect remedies subject to one-satisfaction and contract terms.
- 05
An unauthorized actor can become liable for misrepresentation or warranty even when the principal is not bound.
Use this attack sequence under time
Frame the issue
Identify authority route.
Resolve the next checkpoint
Classify principal disclosure at contracting.
Resolve the next checkpoint
Determine contractual parties.
Finish the conclusion
If no authority, analyze warranty of authority and tort theories.
Common wrong turns
- Naming a trade name may not identify the principal's legal identity.
- A partially disclosed principal usually leaves agent and principal both liable.
- Ratification can eliminate the unauthorized premise but not all independent misrepresentation issues.
Worked example
An agent signs for 'my client' without naming the client.
The principal is unidentified, so the agent is ordinarily a party to the contract along with the authorized principal.
Practice this topic
Who is bound by an agent's contract
Cornell says an agreement made by an agent is binding on the principal so long as it was within the authority actually granted to the agent or reasonably perceived by a third party. The result depends on the agent's actual authority, on apparent authority, or on the principal's later conduct. A third party who reasonably relies on the agent's apparent authority can hold the principal to the agreement.
NCBE's MEE outline lists the power of an agent to bind the principal, including authority, apparent authority and inherent agency power, as its own topic.
The agent's own liability
For a disclosed principal, the agent is generally not a party to the contract. For a partially disclosed (unidentified) principal, the agent is a party unless the parties agree otherwise. For an undisclosed principal, the agent is a party, and the principal can be held too once discovered (Restatement (Third) of Agency §§ 6.01 to 6.03). An agent who acts without actual authority breaches an implied warranty of authority and is liable to the third party for the resulting loss (§ 6.10). Apply these to who signed and in what capacity.
Identify the principal's status, the agent's authority and the third party's knowledge, then decide who is liable on the contract.
Ostensible agents and the third party's view
Cornell's agency entry calls an agent acting with apparent authority an ostensible agent. Apparent authority exists when, despite no existing authority, a third party reasonably infers from the principal's conduct that someone is authorized to act for the principal. A person with a widely recognized title such as Hiring Director has apparent authority to do anything a reasonable person would believe the title entails.
Frequently asked questions
What is the controlling rule for contract liability and agent warranties?+
Contract liability follows authority and the third party's knowledge of principal identity; an unauthorized agent can separately breach a warranty of authority.
When does an agent's agreement bind the principal?+
When it was within the authority actually granted to the agent or reasonably perceived by a third party, according to Cornell.
What are the kinds of authority that bind a principal?+
Actual authority, which may be express or implied, and apparent authority, plus inherent agency power, which NCBE's outline lists separately.
What does NCBE list under the power of an agent to bind the principal?+
Authority, apparent authority and inherent agency power, which NCBE lists as three separate ways an agent can bind the principal.
Does Cornell's summary state an agent's own liability on a contract?+
No. It covers when the principal is bound, so apply the rule your course teaches for the agent's personal liability.
What facts decide who is liable on an agent's contract?+
The principal's status, the agent's actual or apparent authority and what the third party knew, so build the answer around those three facts.