Relations between the Principal and 3rd Persons Flashcards
What are the three main types of principal?
- Named
- Unnamed
- Undisclosed.
What is an undisclosed principal?
If the agent does not disclose at all that he is acting for a principal and the 3rd person does not know that the agent is acting for a principal, the principal is said to be undisclosed.
What does the validity/effect of the contract between principal and 3rd party depend on?
On whether the agent:
1. Acted within the scope of his authority
2. Exceeded the authority; or
3. Acted corruptly
What if the agent is acting within authority?
Where an agent discloses that they act as an agent for a principal and acts within their authority, the contract between principal and 3rd party is binding on them.
What if the agent exceeds authority given?
The principal is not bound by the transaction. If, however, the principal has benefited from the transaction at the expense of the 3rd party, the principal will be liable ito the law of unjustified enrichment.
What if the agent has acted within what is their apparent authority, but has, unbeknown to the 3rd party, acted contrary to a private instruction or limitation on their authority?
Principal may be liable on the basis of apparent authority.
What happens if the agent acts corruptly?
Principal, upon discovery, has the election to cancel or to affirm it and claim any damages as may be proven.
What is the doctrine of the undisclosed principal?
Refers to a situation where an agent acts on behalf of a principal without revealing the principal’s identity to the 3rd party with whom the agent is dealing. Allows the undisclosed principal to enforce a contract against the 3rd party, even though the 3rd party was unaware of the principal’s existence at the time of the agreement or for a 3rd party to reat the contract as binding on the agent/principal.
What happens if the 3rd party has commenced performance against one of the parties or sue them?
3rd party is barred from making a claim against the other even if they act against the agent before becoming aware of the undisclosed principal.
What are the leading cases on the doctrine of the undiscloseed principal?
- Natal Trading v Inglis
- Cullinan v Noordkaaplandse
- Avis v Highveld Supply Stores
- Karstein v Moribe
What did the court hold in Natal Trading v Inglis?
- An undisclsoed principal is liable when discovered to be sued on a contract made by his agent, subject to such equities perhaps as the occasion may give rise to
- When the undisclosed principal is discovered, the other contracting party has the right to sue either the agent with whom he contracted, believing him to be a principal, or the actual principal
- And if with full knowledge of the circumstances, the 3rd party elects to sue either one, he is debarred from subsequently proceeding against the other on the same contract.
What happens if there is (fraudulent) misrepresentation?
Principal is liable for his agent’s fraud.
What is the leading case on the principal’s liability for his agent’s fraud?
Randbank v Santam.
What did the court hold in Randbank v Santam?
The general principle is that where an agent contracting in the course of his employment and within the scope of his authority, fraudulently conceals or fails to disclose a fact known to him which, having regard to the nature of the contract, he ought to have disclosed to the other contracting party, his principal is liable for, and must suffer the consequences of his concealment or non-disclosure. That responsibility of the principal attaches even if he himself had no knowledge of the fact not disclosed or fraudulently concealed.
What is the case for misrepresentation and non-disclosure?
Hay v Hilder.
