A to Z Rental Center v. Burris
1986 Tex. App. LEXIS 8327, 714 S.W.2d 433 (1986)
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Rule of Law:
An agent who enters into a contract on behalf of a principal has a duty to disclose both their representative capacity and the correct legal identity of the principal to avoid personal liability; disclosure of a trade name is insufficient.
Facts:
- On December 30, 1983, Lloyd W. Burris filed an assumed name certificate to conduct business individually as B & S Construction.
- On February 25, 1984, Burris and Steve Inscore applied for credit from A to Z Rental Center under the firm name 'B & S Construction, Inc.', with Burris listing himself as president.
- Unable to use that name, Burris and Inscore incorporated as 'Burris & Inscore Construction, Inc.' on March 2, 1984.
- From April to July 1984, A to Z Rental Center leased or sold equipment under contracts made out to 'B & S Construction,' five of which Burris personally signed as 'lessee'.
- Burris never informed A to Z Rental that the actual principal was 'Burris & Inscore Construction, Inc.'
- In September 1984, after the transactions occurred, Burris & Inscore Construction, Inc. filed an assumed name certificate stating it was doing business as B & S Construction, Inc.
Procedural Posture:
- A to Z Rental Center brought suit on a sworn account against Lloyd W. Burris in a Texas trial court.
- Following a bench trial, the trial court rendered a take-nothing judgment against A to Z Rental Center, in favor of Burris.
- A to Z Rental Center, as appellant, appealed the trial court's judgment to the Texas Court of Appeals.
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Issue:
Is an agent personally liable on a contract when they fail to disclose the principal's full legal name, even if they disclose a trade name and their status as an agent?
Opinions:
Majority - Per Curiam
Yes, an agent is personally liable on a contract when they fail to disclose the principal's full legal name. To avoid personal liability, an agent has an affirmative duty to disclose not only that they are acting in a representative capacity but also the correct identity of their principal. The court reasoned that the party with whom the agent deals has no duty to discover the principal's identity; the burden of disclosure rests entirely on the agent. The use of a trade name, such as 'B & S Construction,' is generally insufficient disclosure because it does not identify the actual legal entity responsible for the contract. The test is the other party's actual knowledge of the principal’s identity, not suspicion or constructive notice from public records. Because A to Z Rental Center had no actual knowledge that the true principal was 'Burris & Inscore Construction, Inc.', Burris failed in his duty of disclosure and is therefore personally liable on the contracts.
Analysis:
This case reinforces the strict agency law principle that an agent bears the complete burden of disclosing their principal's identity to avoid personal liability. It clarifies that merely using a trade name, even one that includes a corporate indicator like 'Inc.', is not sufficient disclosure of the principal's legal name. The decision protects third parties by ensuring they know the precise legal entity they are contracting with, preventing agents from hiding behind vague or nonexistent business names. For future cases, this establishes that a third party's 'actual knowledge' is the standard, meaning agents cannot rely on public filings or other forms of constructive notice to escape liability.
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