In commercial practice, agency structures are widely used to organise complex transactions and allocate responsibilities between parties.

This is particularly common in sectors such as construction, shipping, and refit projects, where one party may engage specialist contractors on behalf of another. At a practical level, the arrangement often appears straightforward. The agent handles the operational side, while the principal assumes the economic risk.

Under English law, however, the legal consequences of such arrangements are more nuanced. In particular, where an agent contracts in its own name, the assumption that liability can be shifted entirely to the principal is not always secure. The distinction between acting “on behalf of” a principal and acting “in one’s own name” plays a critical role in determining where liability ultimately falls.

At its core, an agency relationship arises when one party (the agent) has authority to act on behalf of another (the principal) and affect its legal position. When everything is clearly set up, and the agent acts purely on behalf of a disclosed principal, the outcome is usually predictable: the principal is bound by the contract, and the agent steps back from the legal relationship. But it is only the starting point. English law does not treat agency as a rigid concept with automatic consequences. Instead, the legal outcome depends on how the agent presents itself to the third party and how the contract is constructed.

Where an agent clearly contracts on behalf of a disclosed principal and does not assume personal responsibility, the principal will normally be liable under the contract. In such circumstances, the agent functions as a true intermediary. However, this position may change where the agent contracts in its own name. Even where it is understood that the agent is acting for a principal, signing and presenting the contract in the agent’s own name may indicate that the agent is itself intended to be a contracting party. In those cases, English law may treat the agent as having assumed personal liability, depending on the construction of the agreement.

From the perspective of the third party, this approach reflects commercial reality. Where a contract is entered into with a named party, the law will generally allow the third party to rely on that party’s liability, unless the contractual documentation clearly indicates otherwise. In other words, even where an agency relationship exists internally, the third party may still be entitled to enforce the contract against the agent.

This is where things become particularly important in practice. Parties often try to manage risk through contractual clauses stating that the principal will be “exclusively responsible” for certain obligations or liabilities. While such provisions can be effective as between the agent and the principal, they do not necessarily affect the rights of third parties, who are not bound by internal arrangements. Typically, these clauses operate only on an indemnity or allocation basis between the contracting parties.

As a result, even where a contract seeks to allocate responsibility to the principal, an agent who contracts in its own name may still face direct claims from third parties. The risk is therefore not eliminated merely by internal drafting.

Another important point is that English law does not provide a single rigid rule determining when an agent will or will not be liable. Instead, everything depends on the objective interpretation of the contract and the surrounding circumstances. In some cases, the agent will not be liable at all; in others, liability may be shared or primarily attached to the agent. The outcome turns on what a reasonable third party would understand the contractual position to be.

From a practical standpoint, form and clarity therefore matter significantly. If an agent intends to avoid personal liability, it must ensure that both the contractual wording and the manner of execution clearly indicate that it is acting solely as agent for a disclosed principal. Conversely, where an agent signs in its own name, there is a material risk that it will be treated as a contracting party, regardless of any internal allocation of responsibility.

In the end, agency is a powerful commercial tool, but it does not override fundamental principles of English contract law. While parties are free to allocate risk between themselves, they cannot automatically impose that allocation on third parties. Where an agent contracts in its own name, it may therefore find itself exposed to liability, even if that was not the commercial intention.

The key point is straightforward. Under English law, it is not enough to decide who should bear the risk. That decision must be clearly and consistently reflected in how the contract is drafted, structured, and executed.

Finally, it should be emphasised that agency clauses, liability allocation provisions, and indemnity mechanisms are highly sensitive drafting elements. Their effectiveness depends heavily on precise wording, contractual structure, and factual context. As such, they should always be carefully considered and drafted with the assistance of experienced legal professionals to ensure that the intended allocation of risk is properly achieved and enforceable in practice.