O.C.G.A. § 10-6-89 (2019)
Contract for nonexisting principal void; right of action against purported agent
The contract of any person or corporation who purports as agent of a nonexisting principal to bind such nonexisting principal only shall be void. Any other party to such contract who is misled thereby to his injury shall have a right of action for damages against such purported agent individually.
History
Code 1933, § 4-410, enacted by Ga. L. 1955, p. 346, § 1.
Annotations
JUDICIAL DECISIONS Section codifies case law. - Rule holding an agent individually responsible when the agent acts for a nonexistent principal was derived from the case law and subsequently included in the statutes. West v. FDIC, 149 Ga. App. 342, 254 S.E.2d 392, 1979 Ga. App. LEXIS 3111, aff’d, 244 Ga. 396, 260 S.E.2d 89, 1979 Ga. LEXIS 1250 (1979). Nonexistent legal entity can have no agent. Dixie Drive It Yourself Sys. v. Lewis, 78 Ga. App. 236, 50 S.E.2d 843, 1948 Ga. App. LEXIS 716 (1948). Corporation acting under a trade name is not a nonexistent principal as a matter of law. West v. FDIC, 149 Ga. App. 342, 254 S.E.2d 392, 1979 Ga. App. LEXIS 3111, aff’d, 244 Ga. 396, 260 S.E.2d 89, 1979 Ga. LEXIS 1250 (1979). Unauthorized foreign corporation. - Fact that a foreign corporation was unauthorized within the meaning of the Georgia Business Corporation Code (see now O.C.G.A. § 14-2-1501 et seq.) would not mean that the corporate agent was acting for a nonexistent principal. Evans v. Smithdeal, 143 Ga. App. 287, 238 S.E.2d 278, 1977 Ga. App. LEXIS 2290 (1977). If one contracts as agent when in fact one has no principal, one will be personally liable. Dixie Drive It Yourself Sys. v. Lewis, 78 Ga. App. 236, 50 S.E.2d 843, 1948 Ga. App. LEXIS 716 (1948). One who assumes to act as agent for a nonexistent principal or one having no legal status renders oneself individually liable in contracts so made. Brown-Wright Hotel Supply Corp. v. Bagen, 112 Ga. App. 300, 145 S.E.2d 294, 1965 Ga. App. LEXIS
678 (1965); Don Swann Sales Corp. v. Echols, 160 Ga. App. 539, 287 S.E.2d 577, 1981 Ga. App. LEXIS 3089 (1981). If there was a nonexistent principal within the meaning of this section, the contract is void and the agent is rendered individually liable. Evans v. Smithdeal, 143 Ga. App. 287, 238 S.E.2d 278, 1977 Ga. App. LEXIS 2290 (1977). When the evidence supports a finding that the purported corporation is not a valid corporate entity, there is no doubt that the agent is bound by the agent’s purchases on an open account. Don Swann Sales Corp. v. Echols, 160 Ga. App. 539, 287 S.E.2d 577, 1981 Ga. App. LEXIS 3089 (1981). Purported agent liable unless other party agrees to look to somebody else. - One who professes to contract as agent for another, when one’s purported principal is actually nonexistent, may be held personally liable on the contract, unless the other contracting party agrees to look to some other person for performance. Hagan v. Asa G. Candler, Inc., 189 Ga. 250, 5 S.E.2d 739, 1939 Ga. LEXIS 683 (1939); Dixie Drive It Yourself Sys. v. Lewis, 78 Ga. App. 236, 50 S.E.2d 843, 1948 Ga. App. LEXIS 716 (1948). Other party’s knowledge of principal’s nonexistence. - One who professes to contract as agent is personally liable on the contract if, unknown to the other party, one’s purported principal is actually nonexistent; however, the agent is not liable when the third person has knowledge of the nonexistence of the
principal or when there is an agreement or understanding to the contrary. Hagan v. Asa G. Candler, Inc., 59 Ga. App. 587, 1 S.E.2d 693, 1939 Ga. App. LEXIS 367, aff’d, 189 Ga. 250, 5 S.E.2d 739, 1939 Ga. LEXIS 683 (1939). Contract for rental of two automobiles,
signed “Hapeville High School, John G. Lewis, Principal,” when both parties knew that the high school had no legal entity, was the individual undertaking of the principal. Dixie Drive It Yourself Sys. v. Lewis, 78 Ga. App. 236, 50 S.E.2d 843, 1948 Ga. App. LEXIS 716 (1948).
RESEARCH REFERENCES Am. Jur. 2d. 3 Am. Jur. 2d, Agency, § 277. C.J.S. 2A C.J.S., Agency, § 395. ALR. Liability on the contract of one who
without authority assumes to contract for another, 42 A.L.R. 1310; 60 A.L.R. 1348. Personal liability of one who assumes to contract as agent for a principal who is fictitious or nonexistent, 126 A.L.R. 114.
ARTICLE 5 AGENTS RECEIVING MONEYS FOR THIRD PERSONS Cross references. Duties and liabilities of banks and trust
companies receiving money for transmission, § 7-1-354.
RESEARCH REFERENCES ALR. Check on bank as payment of debts held by bank for collection, 18 A.L.R. 537; 65 A.L.R. 1151.
Liability of principal for amount of fraudulent excess collection by agent, 46 A.L.R. 1212.