What is the consequence of an agent overstepping their authority?

When an agent oversteps their authority, it may indeed lead to liability for both the agent and the principal. Agents have specific duties and limitations outlined by the principal, which are crucial to maintaining the integrity of the agency relationship. When an agent acts beyond the scope of their authority, any actions taken may not bind the principal to those actions, which can expose both parties to liability.

In this scenario, if a third party relies on the agent’s actions that exceed their authority, the principal may argue that they are not responsible for those actions, potentially leaving the agent liable for any claims or damages incurred as a result. Furthermore, if the third party was aware or should have been aware that the agent was overstepping their authority, the principal may not be held accountable for the agent's actions, reinforcing the potential liability for the agent themselves.

This situation illustrates the strict adherence required in agency relationships, highlighting that overstepping authority can disrupt the balance of responsibility between the agent and the principal. Consequently, it’s essential for agents to operate within their granted powers to avoid unnecessary complications and liabilities.