In order for an agent to avoid personal liability on a contract negotiated in his principal's behalf, he must disclose not only that he is an agent but also the identity of his principal, regardless of whether the third person might have known that the agent was acting in a representative capacity. It is not the third person's duty to seek out the identity of the principal; rather, the duty to disclose the identity of the principal is on the agent. The disclosure of an agency is not complete for the purpose of relieving the agent from personal liability unless it embraces the name of the principal; without that, the party dealing with the agent may understand that he intended to pledge his personal liability and responsibility in support of the contract and for its performance. Furthermore, the use of a tradename is not necessarily a sufficient disclosure of the identity of the principal and the fact of agency so as to protect the agent against personal liability.
Van D. Costas, Inc. v. Rosenberg
Both defendants owned one-third of a company which owned a restaurant. Defendants hired plaintiff to create a "magical entrance" for the restaurant. Defendant signed this contract as "Jeff Rosenberg, The Magic Moment." A dispute arose and plaintiff sued defendants for not paying.
Trial court denied defendant's claim for breach of contract.
Were defendants personally liable for the contract to improve their company's restaurant?
Plaintiff had never heard of the company defendants had ownership of at the time of the contract. It was not his duty to discover the ownership of the restaurant when he had every reason to believe that one of the owners was signing the contract. Jeff knew the owner and it was within his power to avoid personal liability by properly disclosing his principal. Since he did not, he is legally responsible.
The defendant that signed the contract is personally liable for not disclosing his principal. The portion of the judgment exonerating Jeff Rosenberg from liability is reversed, and the case is remanded.