164 10: Agency law Part D The formation and constitution of business organisations
4 Relations between agents and third parties
An agent usually has no liability for a contract entered into as an agent, nor any right to enforce it.
Exceptions to this: when an agent is intended to have liability; where it is usual business practice to have
liability; when the agent is actually acting on their own behalf; where agent and principal have joint liability.
A third party to a contract entered into with an agent acting outside their ostensible authority can sue for
breach of warranty of authority.4.1 Liability of the agent for contracts formed
An agent contracting for their principal within their actual and/or apparent authority generally has no
liability on the contract and is not entitled to enforce it. However, there are circumstances when the
agent will be personally liable and can enforce it.
(a) When they intended to undertake personal liability – for example where they sign a contract as
party to it without signifying that they are an agent.
(b) Where it is usual business practice or trade custom for an agent to be liable and entitled.
(c) Where the agent is acting on their own behalf even though they purport to act for a principal.
Where an agent enters into a collateral contract with the third party with whom they have contracted on
the principal's behalf, there is separate liability and entitlement to enforcement on that collateral contract.
It can happen that there is joint liability of agent and principal. This is usually the case where an agent did
not disclose that they acted for a principal.4.2 Breach of warranty of authority
An agent who exceeds their ostensible authority will generally have no liability to their principal, since
the latter will not be bound by the unauthorised contract made for him. But the agent will be liable in
such a case to the third party for breach of warranty of authority.FAST FORWARD