COMMON

LAW CASES ON
LIABILITIES OF UNDISCLOSED PRINCIPAL

BY
RAHUL DEODHAR

Electronic copy available at: http://ssrn.com/abstract=2195467

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TABLE OF CONTENTS

I.

I. TABLE OF CONTENTS

II. INTRODUCTION

III. BASICS OF LAW ON UNDISCLOSED PRINCIPAL

IV. CASES DETERMINING THE NATURE AND EXTENT LIABILITY OF UNDISCLOSED PRINCIPAL

V. SUMMARY OF POSITION OF UNDISCLOSED PRINCIPAL

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VI. NOTES AND FURTHER READING

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Electronic copy available at: http://ssrn.com/abstract=2195467

II.

INTRODUCTION
The position of law on agency assumes substantial importance with relaxation of
global investment regulations. Extensive globalization allows firms to acquire
assets through agents. When the buyer, vendor and the agent are based in
different countries there is chance that they are subject to different laws and
therefore are affected differently. The complexity increases if the Principal is
undisclosed. In such cases it is important to determine the liability of such a
hidden Principal.
This paper aims to examine the position of common law on the liabilities of
undisclosed Principal through various case laws taking into consideration that
common law forms the basis of dominant legal systems and international
principles in dealing with the matter. The author submits and clarifies that this is
not a exhaustive case law compilation but basic compilation with an aim to
clarify the position.

III.

BASICS OF LAW ON UNDISCLOSED PRINCIPAL

1] Who is a Principal?
a. In general, if one of two apparent parties in a contract is acting on behalf
of other, then that other is termed as the Principal. The party acting on
behalf of the said Principal is called the Agent and the party with whom
the agent contracts is called Third Party.
b. Usually Principal is denoted as P, the agent is referred as A and third party
is referred as TP or T or simply third party.
c. Principal can be disclosed or undisclosed.
2] Undisclosed Principal is the one about whom the third party is not aware of. This
could be because:
a. The agent represents that he himself or herself is the Principal.
b. The Third Party has no reason to believe and there is no declaration by
the Agent about his agency.
c. Agency is disclosed or implied but the Principal remains unnamed. E.g.
when brokers or traders buy a property, it real owner may be some other
party not named.
3] General
a. The object of using an agency is usually for convenience of the Principal,
whether he wishes to remain undisclosed or unnamed or is directly
disclosed and named.
b. Third party can seek specific performance of the contract from the
undisclosed principal. In this case, this alone will serve the principle of
equity that law intends to uphold.
c. Implied exclusion may be a good defence for third party but not for
undisclosed principal.
4] The third party is not without recourse.
a. The third party, in general has elective rights, against agent or
undisclosed principal.

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b. In other words, in this case, the doctrine of privity of contracts must be
strictly applied and thus liability must flow between the parties to the
contract with a result that T can sue A.
c. Alternatively, T can elect to pursue P, but that election absolves A of any
further liability.
d. In rare instances, T can pursue both A and P, particularly when fraud is
perpetrated by A and P in collusion.
5] Rights do not get created against third party if:
a. The contract excludes such rights, implicitly or explicitly, that is to say
that contract excludes intervention.
b. Further, when the undisclosed principal and the third party are unlikely
to contract, the third party must enforce the rights with agent and not the
undisclosed principal.
c. Similar issue has been debated in popular cases following cases
1. Siu Yin Kwan
2. Talbot Underwriting V. NHM
d. The clarifications issued in the above cases state that it must be amply
clear from either the contract itself or circumstances surrounding the
contract that the third party was interested in ascertaining the identity of
the counterparty.
e. There are three dimensions to the exclusion of intervention:
i. Importance of identity of the counter party to the contract.
Deciphering if identity of counterparty is important to the
contracting party comprises three cases:
1. Said V. Butt where
a. Third party wanted to exclude a specific counter
party, namely the critic with whom the theatre did
not enjoy good relations.
b. Contract was made specifically with the agent and
third party can refuse to exclude the principal that
he did not like.

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c. In the case of Said v. Butt, it was held that where
personal element is strikingly present, third party
cannot sue on a contract.
2. Rolls Royce Power & anr. V. Ricardo where the subject of
the contract decided exclusion.
3. Tehran-Europe Case (contrast with) where third party
led the Agent to believe that he may be willing to contract
with anyone.
4. Greers V. Downs Supply Where the third party enters into
a contract with Agent specifically to avail certain benefit
associated with the agent. While the particular case related
to benefit of set-off, any benefit should bar any intervention.
5. Muldoon V. Wood: what was relevant was not the parties'
actual intention but what each was reasonably entitled to
conclude from the attitude of the other. That seems to me
to support the conclusion that the transaction between Mr
Wood and Mrs Muldoon has to be objectively analysed and
Mr Wood's uncommunicated intention to act as agent for
Zealand Properties has to be disregarded because it was not
on the facts as found communicated to Mrs Muldoon.
f. If, under the circumstances, rights of third party are excluded, then
correspondingly liabilities also get excluded. Thus if undisclosed principal
was excluded from intervention, concurrently other parties are barred
from suing the undisclosed principal.
6] The question is whether an undisclosed principal can perpetrate a fraud hiding
behind the doctrine of undisclosed principal.
a. Said V. Butt: Said V. Butt represents unique set of facts. Here the
proponent, Said, knew that the theatre will not entertain his request for
first show tickets. Thus Said, the plaintiff in the case, will have no legal
recourse. However, recourse may be available against Said. Thus the rule
is Undisclosed Principal cannot intervene in contract made specifically
with the agent. But rights of third party against the Principal who declares
himself remain unaffected.

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b. Boyter V. Thomson: The question is whether an undisclosed principal can
perpetrate a fraud hiding behind the doctrine of undisclosed principal.
The answer is found in Boyter V. Thomson wherein the pursuer sued the
undisclosed principal, owner of the boat with certain defects. On behalf of
the defendant, the agent had made the representation in the course of his
business. The act of agent led the pursuer to believe that boat was free of
defects. The pursuer elected to sue the undisclosed principal rather than
the agent. Here the Undisclosed principal was held liable because of two
reasons. First, undisclosed principal was liable in accordance with
principles explain in Siu Yin Kwan. The other reason was that section
14(5) was specifically intended to make undisclosed principals
perpetrating fraud, intentionally or otherwise, liable for the contract. The
distaste of the Law Commission, who recommended this section, with
regard to undisclosed Principal perpetrating frauds from behind the
agents back is clear from the law and its application in this decision.
c. Watteau v Fenwick: The liability of the undisclosed principal extends to
all acts that can, with or without intention, cause the third party to enter
into a contract with the agent. Thus, undisclosed principal is liable for acts
that he may have specifically forbidden. In other words, undisclosed
principal is liable for unauthorized acts of agent, so long as third party can
reasonably presume such authority existed. The law, thus, goes a long
way to protect the third party, from acts that may, intentionally or
otherwise, defraud the third party of legitimate benefits.
d. Kinahan V Parry: Similar logic was implied in Kinahan v Parry [1910] 2
KB 38, that allowing the third party to sue the undisclosed principal was
good law. (Kinahan v Parry was overturned by showing that there was no
agency; but no critique of logic or that of Watteau v. Fenwick was made
hence they stand). The decision in Watteau v Fenwick has been criticised
a lot but most of the criticism is aimed at logic not the decision itself.
e. Edmunds v. Bushell and Jones: Even in Edmunds v. Bushell & Jones [1865]
EngR 12, similar logic is given and it is held that undisclosed principal is
liable for acts of his agent even those expressedly prohibited.

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f. If the contract impliedly excluded intervention then the contract becomes
void.
7] General view on liability of undisclosed principal for acts specifically forbidden:
a. The general view is that Principal is not liable for acts specifically
forbidden by the Principal. This view runs counter to the view expressed
above in Boyter V. Thomson and others.
b. It is the view of the this author that such view is sustainable only when it
does not amount to a fraud on the Third Party. It is pertinent to note that
the critique of Watteau V. Fenwick and Kinahan v. Parry comes down to
the logic and not the decision itself wherein T was allowed to pursue the
Principal.
c. The law must contend with the dilemma that, on one hand, the logic of
Watteau V. Fenwick breaches the structure of agency while on the other
preventing such a breach will amount to fraud on T.
d. The author states that since the Agent acts and works on behalf of the
Principal, it is the responsibility of P to keep A in check and such is
possible. Further, it is not possible for third party to be aware of specifics
of contract between undisclosed principal and his agent to protect his
own interest.
e. The author states that in cases where T is allowed to pursue P, there must
exist a right in favour of P wherein P can claim compensation from A.
f. Of pertinent interest is article by Kevin M. Rogers discussing various
judgements on this topic1.

A Case harshly treated? Watteau v Fenwick re-evaluated Kevin M. Rogers, Hertfordshire Law
Journal 2 (2) 26-29, https://uhra.herts.ac.uk/dspace/bitstream/2299/9180/1/902829.pdf

IV.

CASES DETERMINING THE NATURE AND EXTENT LIABILITY OF UNDISCLOSED PRINCIPAL

The following cases helped evolve the law related to nature and extent of the
liability of the Undisclosed Principal:

1] Siu Yin Kwan v Eastern Insurance Co Ltd

a. Detailed Name: Siu Yin Kwan (Administratrix of the estate of Chan Ying
Lung deceased) and (2) Wang Chang Seu Ying (Administratrix of the
estate of Sae Heng Hai, alias Wang Poa Tsing deceased) v. Eastern
Insurance Co Ltd Co (Hong Kong)
b. Court: Judgement of the Lords of the Judicial Committee of Privy Council
c. Citation: [1993] UKPC 43, [1994] 2 AC 199
d. Key Idea: Main authority to summarize the doctrine of Undisclosed
Principal.
e. Facts: Following are important facts:
i. Employees of Axelson Co. Ltd. (owners of the ship) died in accident.
Employees filed under Employee compensation Ordinance were
awarded $242,000 plus further damages for negligence were
awarded. Axelson was wound up and damages awarded were not
satisfied. Hence representatives of employees proceeded against
Eastern Insurance Company under rights of third parties.
Insurance company contended that party insured was Messrs.
Richstone Industries Ltd. and not Axelson and nothing in proposal
indicates Richstone was acting as agent of Axelson.
ii. Insurers knew that Richstone was an agent for Axelson in earlier
case. Argued by Judged that this was a case of unnamed but
disclosed principal but was not the basis of the judgement. Lords
were compelled to decide if Axelson was entitled as undisclosed
principal.
iii. Richstone had authority by virtue of contract to obtain such
insurance.
f. Decision:

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i. Principle:
1. An undisclosed principal may sue and be sued on a contract
made by an agent on his behalf, acting within the scope of
his actual authority.
2. In entering into the contract, the agent must intend to act
on the principal's behalf.
3. The agent of an undisclosed principal may also sue and be
sued on the contract.
4. Any defence, which the third party may have against the
agent, is available against his principal.
5. The terms of the contract may, expressly or by implication,
exclude the principal's right to sue, and his liability to be
sued. The contract itself, or the circumstances surrounding
the contract, may show that the agent is the true and only
principal.
ii. Ancillary logic: Personal contracts cannot be interfered with. Thus,
undisclosed principal cannot intervene in contract to paint portrait
etc. The fact of intervention breaches the contract.
2] Browning V. Provincial Insurance Company of Canada
a. Citation: [1873] 5 L.R.P.C. 263
b. Key Idea: Undisclosed principal is not assignee but true principal.
c. Ratio: A contract that provides that it shall not be assignable, cannot be
assigned. But this provision does not preclude intervention by an
undisclosed principal.
3] Teheran Europe Co Ltd v. ST Belton (Tractors) Ltd
a. Citation: [1968] 2 QB 545
b. Key Idea: Testing if T could have contracted with anyone generally or
barred some parties.
c. A test propounded by Lord Diplock: whether T is willing, or leads A to
believe he is willing, to contract with anyone on whose behalf A might be
acting. Such willingness will normally be assumed in the case of an
ordinary commercial contract unless the terms of the contract or
surrounding circumstances make it clear that that is not the case.

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d. Terms: T is third party and A refers to Agent.
e. Relevant Quotation: An insurance policy included a term to the effect that
benefits under the policy could not be assigned (that is, they could not be
transferred to another party). Nevertheless, the Privy Council did not
think that this prevented the intervention of an undisclosed principal.
4] Fred Drughorn V. Rederiaktiebolaget Transatlantic
a. Citation: [1919] AC 203
b. Key Idea: If identity of A is not critical then P can intervene and enforce
rights against T.
c. Ratio: A Charterparty was signed on behalf on an individual who was
named as charterer. It was held by the House of Lords that this was not
inconsistent with the named charterer having entered into the
Charterparty as agent for his employer. Accordingly, the employer was
entitled to intervene as undisclosed principal, and enforce charterparty
against owners.
d. Relevant Quotation: The agent signed as charterer, but this did not
preclude intervention in the contract by an undisclosed principal.
5] Said v. Butt
a. Citation: [1920] 3 KB 497
b. Key Idea: If As identity was material to the formation of contract then P is
barred from acquiring rights or liabilities from the contract.
c. Facts: The plaintiff wished to attend the first night of a play. He had had
serious differences of opinion with the management of the theatre, and he
knew that an application for a ticket in his own name would be refused.
He therefore arranged for a friend to go to the theatre and buy a ticket for
him without disclosing the fact. When he turned up for the performance
he was refused admission. His claim for damages was dismissed. The
evidence showed that a first night is a special event with characteristics of
its own, and that first night tickets are only given or sold to persons whom
the management selects and wishes to favour.
d. Ratio: McCardie J found that the purchaser's identity was a material
element in the formation of the contract and that the failure to disclose

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the fact that the ticket was bought on his behalf prevented the plaintiff
from asserting that he was the undisclosed principal.
e. Argument: The case highlights as to whether identity of specific counter
party would have excluded intervention. Arguably if the friend of Mr. Said
had lent his ticket to any other person, the ticket may have been honoured
without hesitation. Thus, reluctance of the third party to contract with
one single entity has led to exclusion of intervention.
6] Rolls-Royce Power Engineering Plc & Anor v Ricardo Consulting Engineers
Ltd.
a. Citation: [2003] EWHC 2871 (TCC)
b. Key Idea: The subject of the contract can also indicate if T was ready to
contract with other parties or specifically with A. If not, P is excluded from
rights and liabilities.
c. Relevant Question 1: How to know if parties may not have contracted
with any other general party?
d. Relevant Para: Para 56 from judgement quoted as "I have been asked
whether it was of any significance to Ricardo that it was contracting with
WHA rather than anyone else. The answer is that this was of significance.
Both the Concept and the Definitive Design contracts were for a
collaborative project, in which Ricardo were to work closely with (and to
train) the client throughout these design development stages. We agreed
to do this (and prepared our budget) on the basis that it was WHA's
personnel, at WHA's premises, who were the client. WHA were well
known to us and we thought that the intended collaboration was
workable on the terms set out in the proposal documents, and was likely
to be worthwhile (in the sense that the project was likely to be profitable
to Ricardo both financially and in terms of adding to Ricardo's profile and
portfolio). Obviously the same would not necessarily be the case with any
and every other engineering firm or company."
e. Argument for Question No.1:
i. The contract in this case was one where degree of involvement with
the agent was important factor that excluded intervention.

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ii. Thus, even subject of the contract can give indication as to whether
intervention is included or excluded.
7] Greer v. Downs Supply
a. Citation: [1927] 2 KB 28 (CA)
b. Key Idea: If T contracts with A considering the special character of A, then
T is precluded from suing P when P is disclosed. Special character may
include knowledge and skill, financial strength, history of transaction,
advantages such as loans and outstanding debts etc.
c. Ratio: The third party only entered into the contract with the "agent"
because the "agent" was its debtor." Here the third party was expecting
benefits from set-off that he may achieve in dealing with the agent.
8] Muldoon v Wood
a. Citation: [1998] EWCA Civ 588
b. Relevant Quotations 1: It seems to me that the agent's liability, if he fails
to disclose the existence of an undisclosed principal, is the natural result
of his failure to disclose and of his acting to all outward appearances on
his own behalf.
c. Relevant Quotation 2: Another ground of appeal was that it was claimed
that the judge erred in failing to find that there were facts from which he
should have concluded that Mr Wood was not contracting personally but
as an agent. In support of this, it was suggested that what was relevant
was not the parties' actual intention but what each was reasonably
entitled to conclude from the attitude of the other. That seems to me to
support the conclusion that the transaction between Mr Wood and Mrs
Muldoon has to be objectively analysed and Mr Wood's uncommunicated
intention to act as agent for Zealand Properties has to be disregarded
because it was not on the facts as found communicated to Mrs Muldoon.
d. Key Idea: If Agent seemingly acts for himself, then he excludes P from
rights and liabilities by his failure to disclose existence of P.
9] Humble v Hunter
a. Citation: (1848) 12 Q.B.
b. Key Idea: P is excluded from the contract so long as A describes himself as
a true principal, rightly or wrongly.

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c. Brief Facts: H chartered a ship from X (an undisclosed agent) who
described himself as owner. In fact X was not the owner and the
undisclosed principal of X (the agent) could not sue when freight on
charter was unpaid by H.
10] Nash V. Dix
a. Citation: [1898] 78 L.T.
b. Key Idea: If A is buyer in own right, T cannot import doctrine of
undisclosed principal.
c. Ratio: Dix sought to resist Nashs claim for specific performance of a
contract to sell a congregational chapel on the grounds that the plaintiff
secretly acting as agent for a committee of Roman Catholics, who
proposed using the building for Roman Catholic worship and whose
earlier and more direct overtures had already been rejected by the
defendant vendors. However, what in fact happened was that Nash,
realised that if he were to buy the chapel he could make a quick profit by
reselling it to the Catholics. It was held that the defendant had to sell it to
the plaintiff, who was a purchaser in his own right and not an agent of
undisclosed catholic principals.
11] Clarkson Booker Ltd v Andjel
a. Citation: (1964) 2 Q.B.
b. Key Idea: T must elect to pursue A or P but not both. However, this
judgement clarifies the point at which election is made.
c. Brief Facts: Clarkson supplied air tickets valued at 728.7.6d to the
defendant (a travel agent) with whom on several occasions in the past
they had dealt as principal. Later P Co, also operating as travel agents,
disclosed that Andjel had in fact acted solely as their agent. Clarkson
wrote separate letters to Andjel and to P. Co (the undisclosed principal)
threatening proceedings if payment were not made. 5 weeks later
Clarkson issued a writ against P.Co, but on hearing of the companys
insolvency proceeded no further with the action. Clarkson then issued a
writ against Andjel and judgement was given at first instance. Andjel
appealed on the ground that by serving the earlier writ on P.Co, Clarkson
had elected to exonerate the agent.

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d. Ratio: It was held that there was no conclusive election by the plaintiff
and therefore he could sue Andjel, the agent. Andjel had not been lulled
into a false sense of security by the plaintiff suing P.Co. If judgement had
been obtained against the defendant then the matter would have been
different since one cannot have two judgements in respect of the same
debt or cause of action.
12] Armstrong V. Stokes
a. Citation: (1872) LR 7 QB 598
b. Key Idea: If T believes A to be the principal while P remains undisclosed, T
does not have recourse to sue P when he becomes known.
i. However, in Irvine & Co v Watson & Sons, judge Brett LJ, defined the
ratio narrowly by adding a clause after he paid the agent.
c. Basic Facts: A seller gave credit to A, who sometimes dealt as principal
and sometimes as agent. The seller did not inquire whether on this
occasion A was acting as principal or agent. Before the existence of the
principal was disclosed the principal paid the purchase price for the
goods to A, but A failed to pay the seller. In an earlier case on disclosed
principals, Heald v Kenworthy [1855] 10 Exch 739, Parke B said, if a
person orders an agent to make a purchase for him, he is bound to see
that the agent pays the debt; and the giving the agent money for that
purpose does not amount to payment, unless the agent pays it
accordingly I think that there is no authority for saying that a payment
made to the agent precludes the seller from recovering from the principal,
unless it appears that he has induced the principal to believe that a
settlement has been made with the agent. However, Blackburn J rejected
the application of this principle to the undisclosed principal because it
would cause intolerable hardship. He concluded that the seller could not
sue the principal for the debt. In support of the decision it can be argued
that the third party did not have in mind the creditworthiness of the
principal, but only that of the agent.
d. Ratio: Following explanations have been given for the decision (not by
the court)

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i. It was concerned with particular customs among Manchester
commission agents (Irvine & Co v Watson & Sons [1880] 5 QBD
414; Sealy and Hooley, pp.15052), but this does not appear in the
judgment of Blackburn J.
ii. It was a decision about an unidentified principal (in which case the
principal is liable unless the third party has led the principal to
believe the debt has been paid by the agent) and not an
undisclosed principal. But it is clear from his judgment that
Blackburn J was dealing with undisclosed principals.
iii. In Irvine & Co v Watson & Sons (1880) 5 QBD 414 (Sealy and
Hooley, pp.15052), the Court of Appeal distinguished and even
doubted Armstrong. Contrary to what Blackburn J actually said,
Brett LJ interpreted the decision narrowly: Probably their
decision means this, that, when the seller deals with the agent as
sole principal, and the nature of the agents business is such that
the buyer ought to believe that the seller has so dealt, in such a
case it would be unjust to allow the seller to recover from the
principal after he paid the agent.
iv. The decision is wrong. While the doctrine of the undisclosed
principal exists for purposes of commercial convenience, it is
important to maintain protections for the third party. In the
situation where the agent has failed to pass the payment to the
third party, either the principal or the third party will lose and it
seems fairest to place the loss on the principal
13] Boyter V. Thomson
a. Citation: [1995] UKHL 20, [1995] 3 WLR 36, [1995] 2 AC 628, [1995] 3 All
ER 135, 1995 SC (HL) 15, 1995 SLT 875, 1995 SCLR 1009
b. Key Idea: Undisclosed principal is liable where agent acts with implied
authority as implied by third party. T cannot protect himself against laws
that absolve P relying on the nature of P (seller not in course of business)
because P is undisclosed and T has not opportunity to know of his
increased liability.

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c. Bare Facts: The pursuer sued the undisclosed principal, owner of the boat
with certain defects. On behalf of the defendant, the agent made the
representation in the course of his business. The act of agent led the
pursuer to believe that boat was free of defects. The pursuer elected to
sue the undisclosed principal rather than the agent.
d. Important side facts: In this case, the section 14(5) of Sale of Goods Act
reads as The preceding provisions of this section apply to a sale by a
person who in the course of a business is acting as agent for another as
they apply to a sale by a principal in the course of a business, except
where that other is not selling in the course of a business and either the
buyer knows that fact or reasonable steps are taken to bring it to the
notice of the buyer before the contract is made. The interpretation of this
line may be misleading. It apparently appoints liability to the agent.
However, the true meaning explained in the judgment is that the fact that
no sale of goods by private individuals was subject to any implied
condition of fitness even where such individuals sold through auctioneers
or agents, a situation which could cause hardship where buyers relied on
the agent's reputation. Subsection (5) was drafted by the Law
Commissions to meet this situation. Thus, the clause intends to appoint
liability to the principal who despite selling not in course of business,
either fails to inform the buyer or remains hidden from the buyer so that
buyer cannot so deduce himself.
e. Decision: The appeal by the owner, i.e. the undisclosed principal,
contending that the agent is the one responsible, was dismissed.
f. Ratio: Undisclosed principal is held liable. That is part argument. The
other part is that section 14(5) was specifically intended to make
undisclosed principals perpetrating fraud, intentionally or otherwise,
liable for the contract.
14] Watteau v Fenwick
a. Citation: [1893] 1 QB 346
b. Key Idea: Undisclosed principal is liable where agent acts with implied
authority as implied by third party.

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c. Brief Facts: Plaintiff, Watteau, sold goods to a pub manager, Humble,
under the belief that Humble was actually the pub owner. Plaintiff learned
that Defendant, Fenwick, was the actual owner and sought to collect from
Defendant for the unpaid balance of goods purchased by Humble.
Defendant owned a hotel-pub that employed Humble to manage the
establishment. Humble was the exclusive face of the business; Humbles
name was on the bar and the license of the pub. Defendant explicitly
instructed Humble not to make any purchases outside of bottled ales and
mineral waters, but Humble still entered into an agreement with Plaintiff
for the purchase of cigars. Plaintiff discovered that Defendant was the
actual owner and brought an action to collect from Defendant.
d. Ratio: General rule is that undisclosed principal is not liable for acts of
agent outside the authority granted to him. However the undisclosed
principal was held liable in this case. Thus an undisclosed principal can be
held liable for the actions of an agent who is acting with an authority that
is reasonable for a person in the agents position regardless of whether
the agent has the actual authority to do so.
15] Edmunds v. Bushell and Jones
a. Citation: [1865] EngR 12 (B)
b. Facts: Jones employed Bushell as the manager of his business in London
under the name of Bushell & Co. Jones forbade Bushell from drawing
and accepting bills of exchange. Bushell breached this prohibition in
accepting some bills and Jones was sued upon one of them by the plaintiff.
It was held that Jones was liable. Neither the plaintiff nor any previous
holder of the bill knew that Bushell was an agent of Jones.
c. Ratio: When the P is undisclosed, and there is fair representation that A is
indeed the principal, then rights of T remain unchanged even when P
intervenes.
16] Keighley Maxsted & Co. v. Durant
a. Citation: [1901] AC 240
b. Note: This decision relates to ratification by undisclosed principal and
does not have direct bearing on present case.

19
c. Basic Facts: Principal has asked the corn merchant to buy wheat jointly in
the name of principal and the merchant at specified price. The merchant
exceeded his authority and bought the wheat at higher prices in his own
name without mentioning the principal (appellants). Later the principal
ratified the decision but subsequently refused to take delivery of the
wheat. It was held that the merchant (or Agent) was solely responsible for
the purchase as the principal was under no legal obligations to the
respondents (the vendor, third party). Any purported ratification by the
principal was invalid.
d. Ratio: A person who was alleged to have intended to contract on behalf of
a third party, but without his authority, made a contract, not professing to
act on behalf of a principal, and it was held that it was not competent for
the third party to ratify the contract, because the intention of the agent
could not be inquired into for the purpose of altering the contract as
made.
17] Cooke v Eskelby
a. Citation: (1887) 12 App. Cas. 271, 56 LT 673
b. Note: The circumstances are convoluted and judgement is not clearly
applicable to this case.
c. Key Idea: Rights of T remain unchanged even when P intervenes. If T had
right to set-off against A, same right is applicable against P. The doctrine,
which allows a set-off against an agent to be effective against his
(undisclosed) principal, is based upon Estoppel. Consequently, it only
operates where the principal has represented to the third party that the
agent is the principal.
d. Basic Facts: suggests that the third party can only claim his right of set off
where the undisclosed principals conduct raises an Estoppel. This
limitation can possibly be restricted to the facts of the particular case. It
involved a firm of brokers who sometimes acted as agents and sometimes
as principals. In this case they sold cotton to the third party not disclosing
that they were acting as agents. The third party knew that the brokers
were sometimes principals and sometimes agents, though in this case he
did not know in which way they were acting. The undisclosed principal

20
sued for the purchase price. The third party claimed a set off for money
owed by the brokers. The claim failed. The House of Lords held that
simply for the third party to show that the agent had acted as a principal
was not enough. The third party also had to show that the agent was
made to appear as the principal by the authority or real conduct of the
principal.
18] Rabone v. Williams
a. Citation: (1785) 7 Term Rep. 360
b. Key Idea: Rights of T remain unchanged even when P intervenes. If T had
right to set-off against A, same right is applicable against P. The doctrine,
which allows a set-off against an agent to be effective against his
(undisclosed) principal, is based upon Estoppel. Consequently, it only
operates where the principal has represented to the third party that the
agent is the principal.
c. Basic Facts: An agent, acting for an undisclosed Principal, sold defendant
some goods. The defendant owed money to the agent. Subsequently, the
principal intervened on the contract to sue the defendant for the price of
the goods. The defendant argued that he should be able to set off the debt
owed by the agent against his liability to the principal. It was held that
where the agent delivers goods in his own name, thus concealing the
agency, the purchaser contacts with the agent and enjoys the right of set-
off against the agent. If the real principal intervenes on the contract, the
purchasers right of set-off on the contract remains. The defendant may
have his set-off against the real principal.
19] Dyster v Randall & Sons
a. Citation: [1926] Ch 932
b. Key Idea: When P involves A to circumvent the views of T, P can still claim
performance provided identity was not material to the contract. Assumed
that contract was valid (as there is scope for misrepresentation).
c. Relevant Facts: Here a developer, Dyster wished to purchase land from
Randall. Dyster knew that though the land was for sale but Randall would
not sell it to him. Hence he bought the land through an agent Crossley
without disclosing his identity. When Randall discovered this, he wished

21
to renege on the contract. Dyster brought an action for specific
performance. It was held that silence of the agent did not amount to
misrepresentation. This was not a personal contract and identity of the
purchaser was irrelevant. Hence specific performance was granted in
favour of the undisclosed principal.
d. Relevant Quotations: In the course of his judgment Lawrence J agreed
with much of what had been said by McCardie J, nevertheless, he ordered
specific performance. He remarked that, mere non-disclosure as to the
person actually entitled to the benefit of a contractdoes not amount to
misrepresentation, even though the contracting party knows that, if the
disclosure were made, the other party would not enter into the contract.
It would seem that the courts favour this approach, particularly where
commercial parties are involved.
e. Ratio: The question is formulated as follows:
i. Is the contract valid? Does it suffer from defects arising out of fraud
or misrepresentation? If yes, the contract becomes void.
ii. Is the identity of the purchaser significant to the contract? If yes the
undisclosed principal does gain the right to sue. If no, the rights
pass on.
20] Gordon v Street
a. Citation: [1899] 2 Q. B. 641
b. Key Idea: If the identity of the P remains unknown before the contract and
thereafter is disclosed to the prejudice of T, T can renege on the contract.
c. Basic Facts: The defendant was induced to borrow money from Gordon, a
moneylender, whose usurious practices were notorious, who on this
occasion contracted under the name of Addison. On discovery of the fraud
Street was held to be entitled to repudiate the contract.
d. Basic Ratio: If he is for any reason unwilling to deal with the party as to
whose identity he was mistaken and who is seeking to enforce the
contract, as where such adversary party is a notorious usurer, whom the
other party was seeking to avoid in business and with whom he had
refused to deal. The contract is void in such cases.

22
21] Boulton v Jones and Another
a. Citation: [1857] EngR 935; (1857) 2 H & N 564; 157 E.R. 232 (25
November 1857)
b. Note: Here there was no principal agent relationship and the court
concluded so. Hence not applicable to this case.
c. Basic Facts: The defendants, who had been in the habit of dealing with B,
sent a written order for goods directed to B. The plaintiff, who on the
same day had bought Bs business, executed the order without giving the
defendants any notice that the goods were not supplied by B. However,
the plaintiffs bookkeeper struck off the name of B in and inserted the
name of plaintiff in the order. The invoice was generated in the name of
the plaintiff. Here, it was contended that plaintiff did not notify the
defendant and thus represented himself as an agent of the other person
(B).
d. Decision: It was held, that the plaintiff could not maintain an action for
price of goods against the defendants.
22] Collins v. Associated Greyhound Racecourses
a. Citation: [1930] 1 Ch 1
b. Key Idea: If identity is critical to the contract then there is no scope for
undisclosed principal.
c. Basic Ratio: The Court of Appeal held that the identity of the underwriters
of shares in a new company was crucial, because the company needed to
be sure that they were responsible persons. If the underwriters failed,
the company would be in financial difficulties. There was no scope in this
situation for an undisclosed principal.
23] Cole v C.H. Handasyde & Co,
a. Citation: 1910 S.C. 68
b. Key Idea: Assignment of contract without informing counterparty
c. Basic Decision: The basic contractual position is that a party to a contract
cannot transfer his obligations under that contract without the other
partys consent.
d. Some Quotations: Lord President Dunedin indicated (at 1910 S.C. 73-74)
that it was essentially a matter of construction in the light of all the

23
circumstances whether a contract involved delectus personae and hence
was not capable of being performed by anyone other than the ostensible
contracting party. In the same case Lord Kinnear pointed out, at 75, that:
"The Principal which we call delectus personae ... applies when a person is
employed to do work or to perform services requiring some degree of
skill or experience. And it is therefore to be inferred that he is selected for
the employment in consequence of his own personal qualifications. Such a
contract is not assignable by him to a third person who may or may not be
competent for the work".
24] Asphaltic Limestone Company Limited v Glasgow Corporation,
a. Citation: 1907 S.C. 463
b. Key Idea: Assignment of contract
c. Note: Not applicable deals with assignment of contract
d. Basic Decision: A trustee in sequestration or the liquidator of a company
may adopt a contract which is beneficial to the bankrupt or company
25] United Kingdom Insurance Association v Nevill
a. Citation: [1887] 19 QBD 11
b. Key Idea: P when expressedly barred cannot be liable.
c. Basic Facts: Nevill (P) and Tully (A) were part owners of a ship. Tully was
the member of the UK Association (T) and he insured the ship with them.
Nevill was unknown to the Association. The Associations rule stated that
only members were liable for premiums. Presently, Tully went bankrupt
and Association sought payment from Nevill. It was held that the terms of
UK Association expressedly excluded an undisclosed principal. Therefore
Nevill was not liable for the premium.
d. Some Quotation: Where the existence of the principal is undisclosed the
agent will always appear to contract as principal and it may be difficult to
determine whether or not the agent has actually contracted as principal.
26] Curtis v Williamson (1887)
a. Citation: LR 10 QB 57, 31 LT 678
b. Key Idea: T electing to sue P or A. Judgement deals with the point at which
election is deemed to be made.
c. Note: Similar to Clarkson Booker Ltd v Andjel at No. 11 in this list.

24
d. Basic Facts: Boulton, appearing to act on his own behalf, purchased some
gunpowder from the plaintiffs. Later, the plaintiffs discovered that
Boulton was acting on behalf of an undisclosed principal the defendant
mine owners. Then Boulton filed a petition of liquidation and the plaintiffs
filed an affidavit in those proceedings in an attempt to recover the debt
owed for the gunpowder. However, the plaintiffs then changed their mind
and sued the defendant principal. Held once an undisclosed principal is
discovered the third party may elect to sue that principal. Secondly, the
filing of the affidavit against the agent did not prevent the action against
the principal.
27] Kinahan V Parry
a. Citation: [1910] 2 KB 38,
b. Ratio: Allowing the third party to sue the undisclosed principal was good
law.
c. Note: Kinahan v Parry was overturned by showing that there was no
agency; but not critique of logic or that of Watteau v. Fenwick was made
hence they stand). The decision in Watteau v Fenwick has been criticised
a lot but most of the criticism is aimed at logic not the decision itself.
28] Novasen S.A v Alimenta S.A.
a. Citation: [2011] 1 Lloyd's Rep 390, [2011] EWHC 49 (Comm)
a. Note: Not applicable to either sides as intervention by P is accepted for
two reason, first as right of undisclosed principal and second because of
interpretation of arbitration act. Secondly, the dispute is whether or not P
can intervene.

25

V.

SUMMARY OF POSITION OF UNDISCLOSED PRINCIPAL

1. The position of law depends on various factors:
a. Whether Principal was undisclosed, disclosed but unnamed.
b. Whether representation was made by A of him being Principal.
c. Whether identity of party was important consideration for T.
2. The general remedy available to third party is thus:
a. The third party, in general has elective rights, against agent or
undisclosed principal.
b. In other words, if the doctrine of privity of contracts must be strictly
applied the liability must flow between the parties to the contract with a
result that T can sue A.
c. Alternatively, T can elect to pursue P, but that election absolves A of any
further liability.
d. In rare instances, T can pursue both A and P, particularly when fraud is
perpetrated by A and P in collusion.
3. In cases where A acts contrary to instruction of Principal:
a. General rule is that only A can be sued and Principal is not liable.
b. This rule has been negated in some cases including Watteau V. Fenwick
and Kinahan V. Parry etc. where T was allowed to sue P. However in such
cases P has separate right to be compensated by A.

26

VI.

NOTES AND FURTHER READING

1. The Liability of the Undisclosed Principal in Contract, Wm. Draper Lewis, Columbia Law Review,
Vol. 9, No. 2 (Feb., 1909), http://www.jstor.org/stable/1109222
2. A Case harshly treated? Watteau v Fenwick re-evaluated, Kevin M. Rogers, Hertfordshire Law
Journal 2 (2) 26-29, https://uhra.herts.ac.uk/dspace/bitstream/2299/9180/1/902829.pdf
3. The Liability of an Undisclosed Principal, Floyd R. Mechem, Harvard Law Review, Vol. 23, No. 7
(May, 1910), pp. 513-530, http://www.jstor.org/stable/1325286
4. Squaring Undisclosed Agency Law With Contract Theory, Randy E. Barnett, California Law Review
December, 1987, http://www.bu.edu/rbarnett/squaring.htm
5. Ratification and Undisclosed Principals, Arnold Rochvarg, McGill Law Journal 1989,
http://lawjournal.mcgill.ca/documents/34/2/Rochvarg.pdf
6. Undisclosed Principal's Rights and Liabilities: A Test of Election of Remedies, Grover R. Heyler,
California

Law

Review,

Article

Volume

39,

Issue

http://scholarship.law.berkeley.edu/californialawreview/vol39/iss3/7

date:

9-30-1951,

27
ABOUT ME
I am a student of law in University of Mumbai, India and I am an author and an
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