When is an Agent Personally Liable to the Third Party?

As agent is only a connecting link between his principal and third party. He cannot, as a rule, personally enforce the contract entered into by him on behalf of his principal, nor can he be personally liable of such contracts in the absence of a contract to the contrary.

But there are circumstances under which the agent incurs personal liability. These are:

Where the agent expressly agrees : If an agent, while contracting with a third party, expressly agrees to be personally liable on the contract, he can be held personally liable for any breach of contract.

When the agent acts for a foreign principal: Where an agent contracts for the sale or purchase of goods for a merchant residing abroad, he is presumed to be personally liable.

Where the agent acts for an undisclosed principal : Where an agent does not disclose the name of the principal, he is personally liable. But when he contracts for an unnamed principal there is only a presumption of his personal liability.

When the agent acts for a principal who cannot be sued: An agent ,incurs personal liability when he contracts on behalf of a principal, who though disclosed, cannot be sued. Thus, an agent who contracts for a minor, the minor being not liable, becomes personally liable.

Where the agent acts for a non-existing principal: When an agent enters into a contract on behalf of a fictitious or non -existing principal, in such case, the agent is personally liable on the contracts. No agent can bind a non-existent principal.

Where an agent receives or pays money by mistake or fraud: When an agent pays some money by mistake or fraud, he has a right to recover it back from the receiver. Similarly, when a third party pays to an agent some money under mistake or fraud, the agent can be sued for refund of the amount.

When an agent has an interest in the subject matter of the contract: Where an agent himself has an interest in the subject-matter of the contract, the agent is personally liable to the extent of his interest in the subject-matter.

When the agent exceeds his authority : When an agent exceeds his authority or represents to have a kind of authority which he in fact does not have, he commits breach of warranty of authority and is personally liable to third party for any loss caused to him by reason of acting under the false representation.

Trade usage or custom: In certain cases, the trade usage or custom of trade provides that the agent shall be personally liable for his acts. In such cases agent is personally liable.

Where the agent signs a contract or a negotiable instrument in his own name:  Where the agent signs a negotiable instrument or a contract without making it clear that he is signing on behalf of the principal, the agent will be personally liable in that case.

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