What occurs if an agent acts beyond their authority when making a contract?

When an agent exceeds their authority while entering into a contract, the principal may not be bound by that contract. Instead, the agent may be held personally liable to the third party. This is because agents act on behalf of principals, and if they lack the authority to represent the principal in that specific transaction, they effectively act as an individual rather than as an agent of the principal.

In this scenario, the third party has the right to seek performance of the contract from the agent, establishing that the agent has assumed personal responsibility. The principal will not be liable unless they ratify the agent's unauthorized actions afterward or if the third party was aware of the limits of the agent's authority.

Understanding this principle is critical in agency law, as it outlines the boundaries of an agent’s powers and the consequences of overstepping those bounds. This helps clarify the responsibilities of agents and the protections afforded to both agents and third parties in contractual agreements.