Connecticut Court Applies the Law of a Purported Agent on Behalf of an Undisclosed Principal; the Agent is Liable on the Debt

Connecticut Court Applies the Law of a Purported Agent on Behalf of an Undisclosed Principal; the Agent is Liable on the Debt

      In a recent decision from an appellate court in Connecticut, it applied the law of agency with respect to undisclosed principals and, finding there not been complete disclosure as to the principal, held the agent liable in the debt created. Pelletier Mechanical Services, LLC v. G&W Management, Inc., No. 36993, 162 Conn. App. 294 (Jan. 12, 2016).

      G&W Management, Inc., a property manager, had entered into contracts with Pelletier Mechanical Services, LLC with respect to repairs at various properties it managed, including responding to emergencies. Ultimately Pelletier would issue invoices to G&W for more than $16,000. G&W asserted, in defense to liability of those invoices, that it was acting merely as an agent for the property owners, and in consequence that it had no liability on those debts.

      Under the law of agency, when an agent acts on behalf of the principal, the agent is not liable on obligations to the third party. The condition for the application of this rule is that the agent disclose not only that there is a principal, but who is that principal. It is only with the knowledge of who is the principal that the third party is able to assess whether they are willing to extend credit with respect to the work performed.

      G&W defended on the basis that it was known that it was a property management company. Ultimately, that was not sufficient. The Court of Appeals held, inter alia, that even if it was known by Pelletier that G&W was a property management company acting on behalf of the property managers, G&W had never disclosed who are the principals. Applying settled Connecticut law as well as comment (b) to section 6.02 of the Restatement (Third) of Agency, the court had little difficulty in finding G&W liable. Also, the Court reiterated the rule that it is the obligation of the agent to effect full disclosure to the third party; the third party does not have a duty of inquiry with respect to whether there is and who is the principal.