In most legal matters, a duly authorized agent may be appointed by an involved party to act as that party’s proxy in important legal negotiable instruments. But with negotiable instruments, the introduction of even a duly authorized agent raises the issue of liability. After all, if a given party did not directly sign a negotiable instrument, that party might not be considered liable for the terms of the instrument. Furthermore, if the agent did affix his or her signature to the instrument, then that agent might, hypothetically, be held liable for that instrument.
Fortunately, however, authorized agents are generally insulated from such liability. As long as the agent is officially authorized by the party whom he or she is representing, then the agent cannot be held liable for the terms of the negotiable instrument.
In order for this protection to fully take effect, any authorized agents signing a negotiable instrument must disclose exactly the parties whom they represent such that it is clear where liability does fall. If an agent does not disclose the principal whom he or she represents, the agent would actually become subject to liability for the negotiable instrument which he or she was endorsing by proxy.
Sometimes, duly authorized agents will have their agency restricted with certain terms. In such a case, the agent can still sign for the party whom he or she represents, and as long as the agent is clearly acting within the authority granted to him or her, he or she will not be held liable. If the agent has no such authority, then the party the agent represents will not be held liable for anything the agent signs, while the agent may, in fact, find him or herself liable.
One of the simplest ways for agents to layer protection on themselves is to use some form of endorsement that further insulates the agent from liability for the negotiable instrument. For example, an insurance agent, who receives a check from a client when that check is actually bound for the insurance company, might endorse the check over to the insurance company along with the clause “without recourse.”
Doing so would be called a qualified endorsement and would protect the insurance agent from any kind of liability for the check. In general, this might help to ensure that agents will be protected from any actions they might take, especially with the added protection of their official authority.