If an agent misrepresents themselves as a principal, who is bound by the contract?

In situations where an agent misrepresents themselves as a principal, the agent is generally held responsible and bound by the contract. This principle stems from the concept of agency law, which emphasizes the importance of the agent's role in representing the principal in dealings that benefit the principal. However, if the agent goes beyond their authority or misrepresents their own status (by pretending to be the principal), they effectively assume the consequences of their actions.

The rationale behind this is that third parties rely on the representations made by the agent. If the agent acts outside the legitimate representations of their authority or misrepresents themselves, they do so at their own risk. Thus, the party entering into a contract with the agent would hold the agent accountable for the obligations of the agreement, given that the representation was made by the agent themselves, rather than by the actual principal.

On the other hand, the principal is not bound by the contract in this scenario because the agent acted fraudulently or outside the scope of their authority. The principal may have the right to disavow the contract based on the misrepresentation. This clearly establishes that the agent bears the contractual obligations exclusively due to the misrepresentation made.