Costas claimed that Rosenberg signed for an undisclosed principal and, therefore, was individually liable. Is Rosenberg liable on the contract? Explain.

Costas claimed that Rosenberg signed for an undisclosed principal and, therefore, was individually liable. Is Rosenberg liable on the contract? Explain.

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June 7, 2021
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Van D. Costas, Inc. (Costas), entered into a contract to remodel the entrance of the Magic Moment Restaurant owned by Seascape Restaurants, Inc. Rosenberg, part owner and president of Seascape, signed the contract on a line under which was typed “Jeff Rosenberg, The Magic Moment.” When a dispute arose over the performance and payment of the contract, Costas brought suit against Rosenberg for breach of contract. Rosenberg contended that he had no personal liability for the contract and that only Seascape, the owner of the restaurant, was liable. Costas claimed that Rosenberg signed for an undisclosed principal and, therefore, was individually liable. Is Rosenberg liable on the contract? Explain.

Answer and ExplanationSolution by a verified expert

Explanation

Here, nothing suggests that, at the time the contract was signed, Company C has never heard of Company S. Furthermore, the use of a trade name does not constitute adequate disclosure of the principal's identity.
Individual R recognised that Individual S is the owner and by correctly revealing the principal's name, Individual R may have escaped personal responsibility. Individual R is responsible on an individual basis only.
Yes, on an individual basis, Individual R is liable. In order to escape personal responsibility, an agent must disclose that they working as an agent and the identity of the principal. Checking the name of the principal is not the responsibility of the contracting party.

Verified Answer

Yes, Individual R is accountable on an individual basis. An agent must reveal that they are working as an agent and the identity of the principal, in order to escape personal responsibility.
Where the contracting party is aware of the existence of the principal under whom the agent works, the principal is going to be presumed to have been revealed. It is not the responsibility of the contracting party to check the principal's name.

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