What happens if an agent exceeds their authority in a transaction?

When an agent exceeds their authority in a transaction, the principal may not be bound by the actions taken by the agent, which can lead to liability issues. This is because an agent's authority is defined by their agreement with the principal, and when they act outside of that scope, those actions may not have the legal effect that the agent intended.

The principal typically can choose whether to ratify the unauthorized action or to reject it. If the principal does not ratify, they are not obliged to adhere to the terms of the transaction entered into by the agent. Furthermore, exceeding authority could expose the agent to liability for any damages caused to the principal or to third parties involved, reinforcing the importance of an agent operating within the bounds of their granted authority.

This understanding emphasizes the role of agency law in protecting the interests of the principal while also holding the agent accountable for their actions when operating outside the designated authority.