True or False: An agent must inform the other party if they are acting on behalf of a principal.

An agent is required to inform the other party that they are acting on behalf of a principal to ensure transparency and maintain trust in the business relationship. This obligation is grounded in the principles of agency law, which dictate that the agent is acting as a representative and not in their individual capacity. By disclosing their role as an agent, the other party can understand who they are entering into a contract with, which is crucial for determining liability, authority, and the obligation to perform.

Failing to disclose their status as an agent could lead to complications, such as the other party attempting to hold the agent personally liable for any issues arising from the agreement. This transparency also allows the other party to assess the authority of the agent in executing the contract, which can prevent misunderstandings or disputes later on.

While there are certain exceptions or specific contexts where the obligations might differ, including implied authority or situations where the relationship is clear, the general rule is that agents should affirmatively disclose their status in a transaction to fulfill their fiduciary duty and uphold ethical business practices.