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Establishing Contract Liability of Principals and Agents on Third Parties

By Edited Oct 4, 2015 0 0

When you want to purchase a car, house and lot, or an appliance; a representative may endorse a certain product or property in behalf of the company or owner. This representative will convince you of the features of the product/ property until you hand the payment.

Sometimes, things go wrong intentionally or not. It can be a misleading information or breach in the contract. When this happens, you have the right for restitution (regaining what is yours or supposed to be yours) as stated in contract or according to tort law.

You can also assert vicarious liability on the principal for the negligent act of the agent.

An agent is the representative, acting/selling in behalf of the company or owner. The principal is the person who gives authority to the agent to act or transact business to a third party (customer or client). In vicarious liability, the principal is held responsible for the negligent acts of the agent.

Contract Liability to third parties

When the principal authorizes the agent to enter a contract with the client, he or she can be held liable. The client or third party can assert the terms and conditions stated in the contract and demand full restitution. Under certain circumstance, the agent can be held responsible.

The liability is categorized into three types:

Fully disclosed agency

In this type, the client knows that the agent is selling or transacting in behalf of the principal. The client also knows the actual identity of the principal. The principal is liable, while the agent is not liable to the third party.

Partially Disclosed Agency

In this type, the client only knows information on the agent's status, but not the principal's identity. The client has no other source of information concerning the principal's identity. The principal and the agent is liable to the client should a breach in the contract occurs.

Undisclosed agency

In this type, the client is unaware of both the agent and principal's identity. The principal and the agent will be held liable should a breach in the contract occur.

Exceeding Scope of Authority

1. The agent acknowledges that upon signing or entering a contract, he or she has the authority to do so.

2. Should the agent exceed the scope of his or her authority, the principal will not be held liable.

3. The agent is held responsible should any breach in the contract occur.

In tort liability, the principal is responsible for the negligent acts of the agent, who act within given authority. Consult a Business litigation lawyer today, and learn more on you can assert your rights.

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