Agent and principal relationships with third parties

The following Commercial practice note provides comprehensive and up to date legal information covering:

  • Agent and principal relationships with third parties
  • Principal’s liability for acts of agent
  • Contractual rights and liabilities
  • Disclosed principal
  • Undisclosed principal
  • Payment to agent
  • Contracts executed by deed and under power of attorney
  • Disposition of principal’s property by agent
  • Remedies and breach of warranty of authority
  • Fraud and misrepresentation
  • More...

Agent and principal relationships with third parties

This Practice Note deals with the relationships arising between principals, agents and third parties with whom the agent deals on the principal’s behalf. It considers the principal’s liability for its agent, agent’s authority including remedies for breach of authority, fraud and misrepresentation, and the notions of disclosed and undisclosed principal.

Principal’s liability for acts of agent

A principal is normally liable for all acts of an agent within the agent’s authority, whether responsibility arises in contract or in tort. Authority means the agent’s actual, apparent (ostensible) or usual (customary) authority. For more information, see Practice Notes: Scope and authority of the agent and Forming enforceable contracts—agent's authority to contract.

Restrictions or conditions placed on an agent’s authority by the principal will relieve the principal of liability against third parties who have or ought to have notice of the extent of the agent’s authority.

However, in the absence of such notice, a principal will not be able to escape liability for acts of the agent which fall within the apparent scope of its authority.

Where the act of an agent is beyond the actual or apparent scope of the agent’s authority, the principal is not bound or liable for such act.

However where the principal has received the money or property of a third party as a result of the agent acting beyond its authority,

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