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You run a successful paper mill and send out your three best personnel to secure new wood pulp sources using due diligence and skill. Applying the agency principles outlined in this chapter, answer the following questions. Delilah, does not return with wood pulp, but brings back three contracts. Acting within the scope of her authority, she contracted with Evon, who knew your identity at the time; Felipe, who knew that Delilah was acting on behalf of someone but not whom; and Giorgio, who did not know that Delilah was acting on anyone’s behalf. For which contracts, if any, are you liable? For which contracts, if any, is Delilah liable? Explain. For which contracts, if any, are you liable?
If a third person has no knowledge about the fact that the agent is acting for a principal, then both the agency and the principal is known as undisclosed ones. The agent of an undisclosed principal can be held liable on the contract as the real obligor as she contracted in that capacity. Similarly, an undisclosed principal can also be held liable as he must also assume its burdens. The liability of an undisclosed principal and the agent is an alternative liability. It means that the third party can only make either the principal or the agent liable and not both of them together. The contract with Giorgio is an undisclosed one an you and Delilah are both liable. The situation is the same with Felipe although the agency is known. He can hold either the agent or the principal liable for the contract. However, Evon knew that Delilah was your agent and that you were the principal. Therefore you are liable but Delilah is not.