Who is an undisclosed Principal? What are his rights and Duties? Read on.
The principle of agency is a type of special contract entered into by two or more people, wherein one person acts on behalf of the other.
In the contract law, the term “undisclosed principal” relates mainly to the liability of an agent for the obligations incurred on behalf of the principal. He is a person who acts through an agent for the purpose of any negotiation with the third party without his identity being disclosed.
The third party does not know about the existence of the principal and deems the agent as if he is acting for himself. The agent usually makes such representation as per instructions of the principal or at times if he clearly wishes to bind himself only.
Professor Stoljar has remarked that the origin of the doctrine while being uncertain seems to be a reasonable antiquity, substantial solidity and eminent judicial responsibility under the doctrine of undisclosed principal, a person who is not overtly a party to a contract may acquire rights and be subject to liabilities under such a contract.
In Crompton richardmond co v. salami alhaji atanda, it was held that “where a party contracts with an agent whom he does not know to be an agent, the undisclosed principal is generally bound by the contract and is entitled to enforce it”. it is important to emphasize that the doctrine cannot operate where the agent is unauthorized. This was the view of the house of lords in keighley maxstead & co v. Durant
Rights & Duties of an Undisclosed Principal
Generally speaking, there is no difference between an undisclosed principal and one who is disclosed. If a contract is made on behalf an undisclosed principal, he can sue and be sued in his own name as regards the contract.
According to section 231, if an agent makes a contract with a person who neither knows nor has a reason to suspect, that he is an agent, his principal may require the performance of the contract. The rule is, however not without qualification which are as follows:
- PROOF OF IDENTITY OF THE UNDISCLOSED PRINCIPAL: this involves a consideration of the circumstances in which evidence may be introduced to proof the existence of and the identity of the undisclosed principal so as to enable him to sue and be made liable. In hunter v. humble, the agent described himself in the charter as “owner” of a ship.
It was held that parole evidence was not admissible, to show that he had contracted as agent for someone else, however in F, drug horn ltd v. rederiak trans atlantic, where the agent described himself in the chapter as “charterer”, it was held that the undisclosed principal could be identified by parole evidence. Thus, lord Haldane, drew the distinction between property and contract. In the caser of danzigel v. Thompson the agent was described in a lease as “tenant”. Parole evidence was admissible to show that he was acting for a principal who could be made liable for rent.
- DESCRIPTION USED BY THE AGENT IN CONTRACT: another view is the description used by the agent in making and signing the contract. It may show that he impliedly contracts that there is no principal. Thus, if the agent contracts as “owner” or proprietor” such a contract may imply that there is no principal, but if he contracts as “charterer” or “tenant” it may not.
Also, where the description used is so ambiguous, then parole evidence is admissible. In the united kingdom mutual steamship v. nevill, contributions under an association’s article were only obtainable for members of the association. It was held that the could not be liable. the position was summarized in finzel berry & co v. east cheap dried fruit by MC nair .j. where he stated “it is clear law today that a person who has concluded a contract in his own name may proof by parole that he was acting for an undisclosed principal
- PERSONALITY OF THE AGENT: Another qualification to the general rule as to the right and duties of the undisclosed principal is the personality of the agent. Where the personality of the agent was instruments to bringing about the contract, the undisclosed principal even though identifiable may be unable to sue the third party. This was illustrated by scrutton .j in green v. downsupply and co 4. DUTY OF AGENT TO PERSONALLY ACT: the principal will also be unable to sue the third party, where the contract is one in respect of which the agent must act personally and cannot assign his right.
Undisclosed Principal and the Third Party
Before the undisclosed principal may enforce any right or be liable for any obligation under a contract, apparently made between the agent and a third party, two pre-conditions must be met:
- The agent must have actual authority (express or implied)
- The agent on entering the contract must have intended to act on behalf of the undisclosed principal and not for his own benefit.
Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)