This is when the agent makes a false statement that resulted in formation of contract and later as the contract was based on false statement or misrepresentation of facts, the party of contract will suffer damages. These damages must be compensated by the principal as it is due to agent's misrepresentation of facts who is acting in the best interest of the principal. The principal pay these types of liabilities if the agent has been authorized to act and the damages to the party to contract will be compensated by the principal.
