What are the three principal statuses of a principal in agency termination contexts?

What are the three principal statuses of a principal in agency termination contexts?

• A. Disclosed P, Partially Disclosed P, Undisclosed P
• B. Disclosed Principal, Partially Disclosed Principal, and Undisclosed Principal
• C. Fully disclosed, partially disclosed, and undisclosed principals
• D. Disclosed, Partially Disclosed, Undisclosed

Answer: (B)

The main idea being tested is how much the third party knows about the principal behind an agent’s deal, and how that affects who is the actual party to the contract and who bears liability. The three statuses are Disclosed Principal, Partially Disclosed Principal, and Undisclosed Principal. When the principal is disclosed, the third party knows the principal’s identity; the contract is with that principal, and the agent generally isn’t personally liable on the contract, provided the agent acted within authority. In a partially disclosed situation, the third party knows there is a principal but not who the principal is; both the principal and the agent can end up liable on the contract, depending on how the agent signs and the nature of authority. In the undisclosed case, the third party does not know there is a principal; the agent is the one who contracts with the third party and thus is usually liable on the contract, with the principal becoming liable only if and when the agency is disclosed or later revealed.

The main idea being tested is how much the third party knows about the principal behind an agent’s deal, and how that affects who is the actual party to the contract and who bears liability. The three statuses are Disclosed Principal, Partially Disclosed Principal, and Undisclosed Principal.

When the principal is disclosed, the third party knows the principal’s identity; the contract is with that principal, and the agent generally isn’t personally liable on the contract, provided the agent acted within authority. In a partially disclosed situation, the third party knows there is a principal but not who the principal is; both the principal and the agent can end up liable on the contract, depending on how the agent signs and the nature of authority. In the undisclosed case, the third party does not know there is a principal; the agent is the one who contracts with the third party and thus is usually liable on the contract, with the principal becoming liable only if and when the agency is disclosed or later revealed.