The Undisclosed Principal Issue: When You Can Still be on the Hook for Your Agent’s Actions

As a business owner, you have most likely delegated–or plan to delegate–certain tasks to employees or other individuals under your control. It is simply inevitable. It would be impossible to expect the business owner to take on all the work himself. More often than not, these agents will be given some discretion to conduct business on their own. In these instances, the third party these agents transact with will have no idea that the agents are working on behalf of principals. If you think you are off the hook for liability purposes simply because the third party does not know about you, think again. Undisclosed principals, as they are called, are just as liable as principals who are known from the get go.

There are many scenarios where an undisclosed principal may occur. The third party may not want to be associated with the principal, and thus discretion is sought. Another scenario is as simple as when the agent forgets to mention that he works on behalf of a principal. The principal may further want privacy, or fear strategic holdouts by the third party. It is also possible the third party would not want to deal with the principal if he knew his identity. In these situations, and others, whether or not you can still be liable will be based on custom. Perhaps more importantly, in determining whether or not the undisclosed principal will be held liable may depend on just how much control there was over the agent. Conduct by the agent must be business that is usually within the business conduct by the agent. Whether or not an undisclosed principal will be liable for the agent’s actions is therefore a very fact-specific determination made on a case by case basis.

Exposing yourself to liability as a business owner is one of the biggest mistakes you can make and many times exposure to liability can be minimized or completely eliminated. Having the right legal team in your corner can help do just that. With years of experience, the Trembly Law Firm prides itself on helping business owners make the right decisions. Call the Trembly Law Firm at (305) 431-5678 today to schedule a consultation.