Meaning
Personal liability attaches to an individual who purports to act for a principal without possessing the legal power to bind that party. In cases of breach of warranty of authority, the third party who relied on the claim of agency may seek damages from the purported agent. The promise of existing power is treated as an implied contract.
Because the intended principal is not bound to the agreement, the person who made the false claim provides the only path for financial recovery.
Liability Scope
Liability arises even when the purported agent honestly believes the power exists but has been mistaken about its limits. Contractual damages in a breach of warranty of authority aim to place the claimant in the position they would have held if the power were real. The agent bears the full cost of the failed transaction.
Legal Causation
Reliance forms the basis of the claim because the third party assumes the agent has permission to negotiate. If the third party knew or should have known about the lack of power, the breach of warranty of authority does not apply. Proof of the misrepresentation is necessary for the court to award compensation.
Indemnity Right
Damages often cover the full loss of the benefit of the contract that the principal refused to sign. An agent facing a claim for breach of warranty of authority cannot shift the blame to the principal if no ratification occurs. The financial impact is felt immediately upon the failure of the contract to materialize.
