If agent does not disclose to the 3rd party that he is an agent, which is true?

• A. The third party may sue either the agent or the principal to enforce the contract
• B. Both agent and principal will be liable if a dishonest act occurs
• C. The contract is unenforceable against all parties
• D. The agent will face license suspension

Answer: (B)

When an agent does not disclose that he is acting for a principal, the relationship is considered undisclosed agency. In this setup, if the agent commits a dishonest act, both the agent and the principal can be held liable to the third party. The agent is liable for the fraudulent conduct they personally carried out, while the principal is liable because the agent was acting within the scope of the agency and to advance the principal’s interests. The third party has recourse against both parties for damages arising from the dishonest act. The contract itself isn’t automatically unenforceable, and license discipline isn’t a guaranteed outcome in this scenario; the key point is that dishonesty by the agent exposes both the agent and the principal to liability.