What is the principal's liability in a disclosed agency relationship?

In a disclosed agency relationship, the principal is fully liable for the actions of the agent when those actions occur within the scope of the agent’s authority. This means that if a third party enters into a contract or a situation through the agent, and it is known that the agent is acting on behalf of the principal, the principal bears full responsibility for the consequences of the agent's actions. This liability arises from the legal principle that the agent acts as an extension of the principal when performing authorized tasks.

The agent is essentially viewed as the principal’s representative, and any duties or obligations that arise from the agent’s actions are attributed to the principal. For example, if the agent makes a contractual agreement that falls within their authority and the contract leads to liability or breach, the principal will be held liable to the other party.

Understanding this concept is important because it clarifies the nature of the relationship between the principal, the agent, and third parties involved. It emphasizes the trust and responsibility that the principal places on the agent and the expectation that the agent will conduct affairs in alignment with the principal's directives.