Dwight Stringer signed three promissory notes as an agent for his company. The first, he signed "Dwight Stringer, agent for Park Systems, Inc." The second, he signed "Dwight Stringer, Agent." The third note was signed merely "Park Systems, Inc." Discuss the liability of Dwight and Park Systems, Inc. on each of the notes.

Question

What will be an ideal response?

Answer 1

In order to avoid personal liability when signing an instrument, an agent must indicate he is signing as an agent and also give the name of the principal. On the first note, Dwight signed correctly, indicating his position as agent and giving the name of the principal. In this case, he is not personally liable, and Park Systems, Inc. is liable. On the second note, Dwight will be personally liable to a holder in due course unless he can prove that the holder in due course knew Dwight was acting for someone else when it acquired the note. Even if the note is held by a mere holder, Dwight will be liable unless he can prove that the original parties never intended him to be liable. Park Systems is also liable since the note was made on its behalf. On the third note, the principal, Park Systems, is liable. A principal is liable if the agent signs correctly, the agent signs just his own name, or the agent signs only the name of the principal. Dwight would also have liability.