Generally in contracts, when a person is acting as an agent for a disclosed principal, the agent will not become a party to the contract and will not be personally liable if a contract dispute arises. A principal is disclosed if, at the time of making the contract, the other party has notice that the agent is acting for a principal and knows the principal’s identity. However, the language of the contract must make clear that the agent is working on behalf of the principal.
In the recent Michigan Court of Appeals case Prudential Protective Services, LLC, v. The NRP Group, LLC, a defendant company claimed that it was acting on behalf of a principal when it signed the contract at issue in the case. The Michigan Court of Appeals in Prudential Protective Services, LLC, however, found that the defendant company could be held liable under the contract because it was not clear from the contract, who the purported principal was. The contract did not mention a principal and the defendant company was listed as a party to the contract and agreed to pay the plaintiff under the terms of the contract.
In order to avoid personal liability, it is important that a person or business clearly manifest that they are an agent contracting on behalf of another person or business. Where there is a disclosed principal, and the agent manifests that he is acting on behalf of the principal in making the contract, there is an inference that the agent is not personally liable.
This blog was written by Laura Barrera, law clerk.
