Montana State Life Insurance Exam 2025 – 400 Free Practice Questions to Pass the Exam

When a person deals with an agent without knowledge of the agency relationship, they are generally allowed to pursue any action against the principal that they could have taken against the agent. This is founded on the principle of agency law, where the principal is bound by the acts of the agent, provided those acts are within the scope of the agent’s authority.

In cases where the third party is unaware that they are dealing with an agent, the law protects their interests by allowing them to seek remedies against the principal. This is necessary because the principal is typically liable for the obligations and actions taken by the agent on their behalf. Therefore, if a third party enters into a transaction thinking they are dealing directly with the principal and later discovers that an agent was involved, they still maintain the right to hold the principal accountable for any grievances, just as they could have done had they known they were interacting with an agent.

This aspect of agency law ensures that principals cannot escape their responsibilities simply by hiding behind the actions of their agents, providing a measure of security for third parties in commercial transactions.