Sec 226- for contracts relationship between the principal and the 3rd
persons become bound towards a third person as if he entered into
the contract himself.

• Principal’s liability when agent exceeds authority- principal is not liable.
• Position when the authorized and unauthorized acts are separable sec- 227
• Principal’s liability for notice to the agent – sec 299
• Principal’s liability for agent’s fraud, misrepresentation and torts (sec -238)- do not fall within their authority – it do not
  affect their principals.
• Personal Liability of an Agent
  General Rule – No personal liability [Sec.230], In the absence of contract to contrary, an Agent cannot – (a) personally enforce contracts entered into by him, on behalf of his Principal, (b) be held personally liable for them. This is because the Agent merely acts on behalf of his Principal. Thus, he enjoys immunity from being personally sued. Exceptions, i.e. Agent personally as well as Joint & Severally Liable

The Agent is personally liable in the following cases –
Foreign Principal [Sec.230] : Where the contract is made by an Agent for the sale or purchase of goods for a merchant resident abroad.

Undisclosed Principal [Sec.230]: Where the Agent does not disclose the name of his Principal. Right of undisclosed principal to require performance – sec 231 Right of third person against undisclosed principal – sec 232
Liability of pretended agent – sec 235 Principal cannot be sued [Sec.230]: Where the Principal, though disclosed, cannot be sued, e.g. Principal becoming of unsound mind, subsequent to appointment of agent.
Acting for a Principal not in existence: Where the Agent acts for a Principal who is not in existence at the time of making contracts, he shall be personally held liable e.g. contracts entered into by Promoters before incorporation of a Company are made in their personal capacity and hence personally liable.

Agency coupled with interest [Sec.202] : Where the Agent has an interest in the subject matter of agency.
Agent guilty of Fraud [Sec.238] : Where an Agent is guilty of fraud or misrepresentation in matters that are outside the scope of his authority, he is personally liable, and do not affect his Principal.

Agent exceeds authority & act not ratified: Where an Agent acts either without any authority or exceeds his authority, he shall be held personally liable when the principal does not ratify his acts.

Agent receives or pays money: Where an Agent receives or pays money by mistake or fraud to a third party, he shall be personally liable to such third party. Also ha can personally sue the third party if the fraud or mistake is accountable to such third party.

Express Agreement for personal liability: Where an Agent expressly agrees to be personally bound.
Execution of Contract in his own name: Where an Agent executes a contract in his own name, without disclosing that he is acting as Agent for a Principal, he shall be personally liable, e.g. An Agent signs a Negotiable Instrument without making it clear that he is signing it as an Agent only, he shall be held personally liable on the same. He would be personally liable as Maker of P/N, even though he may be described as Agent.

Trade custom or usage: Where trade usage or custom makes an Agent personally liable.
Agent with special interest: An Agent with special interest or with a beneficial interest, e.g. a Factor or Auctioneer, can sue and be sued personally.
Action against Agent or Principal [Sec 233] : Where the Agent is personally liable, a person dealing with him may hold – (a) either him or (b) his Principal or (c) both of them liable. The liability of Principal and Agent is “joint and several”.
Exclusive liability [Sec. 234]
Where a person has made a contract with an Agent and –Induces such Agent to act upon it in the belief that only his principal would be held liable, Induces the principal to act upon it in the belief that only his Agent would be
held liable. Such Third person cannot later on, shift the liability on to – The Agent, or The principal, respectively.

Liability for contracts:

Disclosed / Partially disclosed principals: liable to a third party for contract
made by the agent
Undisclosed principals: agent, not the principal, is liable as a party on the contract. However, if principal has a duty to perform & fails to do so, agent is entitled to indemnification by principal if third party seeks restitution from agent Liability for Agent’s Torts: Principal may be liable for agent’s torts if they result from the following:

Principal’s own tortious conduct
Principal’s authorization of tortious act Agent’s unauthorized but tortious misrepresentation (if representations were
made within scope of the agency)
Doctrine of Respondeat Superior: principal-employer is liable for any harm caused to a third party by an agent-employee in the scope of employment. This doctrine imposes vicarious liability on the employer. Scope of employment: is employee doing what is normally expected of him, is employee “on the job” from a time & location standpoint, does the employee’s act benefit the employer
Liability for employee’s negligence: act causing the injury must have occurred within the scope of employment, employee going to & from work or to & from meals is usually considered outside the scope of employment
Notice of dangerous conditions: employer has assumed knowledge of any dangerous conditions discovered by an employee & pertinent to employment situation
Liability for employee’s intentional torts: if torts committed within scope of employment
Liability for Independent Contractor’s Torts: General rule is that the employer is not liable.
Test: how much control the employer exerts over the contractor. Exceptionally hazardous activities (blasting) that are contracted are an exception in that there is no shield for the employer
Liability for Agent’s Crimes: General rule is that a principal or employer is not liable for agent’s or employee’s crime even if agent acted within scope of authority or employment. Parties agreed that the agent will act on behalf & instead of the principal in negotiating & transacting bus with 3rd persons. 3 types