P, a principal, engaged A as an agent to buy 100 acres of land. P instructed A to keep P's identity secret. A entered into a contract with T to buy the land, signing the contract 'A, Agent'. A did not reveal P's identity. If P fails to perform on the contract, which of the following is correct regarding liability to T?

Answer options:

Only P is liable because A was acting within the scope of authority.

Only A is liable because P was not disclosed.

Both P and A are liable.

Neither is liable because the contract is voidable.

How to approach this question

Determine the type of agency (disclosed, partially disclosed, undisclosed) and apply liability rules.

Full Answer

C.Both P and A are liable.✓ Correct

This is a case of a 'partially disclosed' principal (T knows A is an agent, but does not know P's identity). In such cases, the third party relies on the agent's reputation since the principal is unknown. Therefore, the agent (A) remains liable on the contract. The principal (P) is also liable because A was authorized to act. T can generally hold both liable.

Common mistakes

Thinking the agent is never liable if they are doing their job (false if principal is not fully disclosed).

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