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Agents Personally Liable for Contract Due to Failure to Disclose Principal
Description Managers and members of an LLC contracted for, but did not pay for, engineering work. Engineering firm did not know about the existence of the LLC, hence the managers and members were liable on the contract under agency law for failure to disclose existence of the principal.
Topic Agency
Key Words Disclosure of Principal, Limited Liability Companies, Members' Liability
C A S E   S U M M A R Y
Facts Lanham and Clark were managers and members of an LLC who contacted Westec about doing engineering work related to construction of a restaurant. Westec did not know that the parties represented an LLC. Based on an oral contract, Westec did work and submitted a bill for $9,183. The bill was not paid. Westec sued Lanham, Clark, and their company. At trial, the LLC admitted liability but the court ruled that Lanham and Clark were not liable. Westec appealed.
Court of Appeals Decision Reversed. "When a third party sued a manager or member of an LLC under an agency theory, the principles of agency law apply notwithstanding the LLC Act's statutory notice rules" that the filing of the articles of organization serve as constructive notice of a company's status as an LLC. "Under the common law of agency, an agent is liable on a contract entered on behalf of a principal if the principal is not fully disclosed." Under the common law, the duty to disclose the identiy of, as well as the existence of, the principal lies with the agent.
Citation Eater, Waste & Land, Inc., d/b/a Westec v. Lanham, 1998 WL 112869 (Sup. Ct., Colo.)
955 P.2d 997(Sup. Ct., Colo., 1998)

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