Question

Under the following three types of agency disclosures, state whether the principal, agent, or both will most likely be held liable to a third party if the principal fails to perform on an agreement entered into by the agent with a third party.

Fully Disclosed                            [ Select ]                       ["Principal", "Agent", "Both"]      

Partially Disclosed                            [ Select ]                       ["Both", "Principal", "Agent"]      

Answer 1

Fully disclosed- principal

Partially disclosed- both

Disclosed Principal: A principal whose identity is known to the third party at the time the agent makes a contract for the principal with the third party. For example, I go in and say I am representing my client, Mr. X, on his behalf.

·Partially Disclosed Principal: A principal whose identity is not known to the third party, but the third party does know that the agent is representing some principal at the time the agent makes a contract with the third party. In many states, the agent is also liable on a contract with a partially disclosed principal.  For example, maybe I am representing someone big, like Disney, and I am buying some land for a new amusement park.  If the seller knew it was Disney, the price would skyrocket.

·Undisclosed Principal: When neither the fact of agency nor the identity of the principal is disclosed by an agent to the third party at the time a contract is made, the agent is presumed to be acting on his or her own behalf, and will be liable as a party to the contract. NOTICE: If, in fact, the agent was authorized to act on behalf of the undisclosed principal, then the principal will also be liable on the contract and subject to indemnification. Here, I go in and don’t say a word that I am representing someone else.