Undisclosed Agency Flashcards
Montgomerie v UK Steamship (1891)
“There is no doubt whatever as to the general rule as regards [A], that where a person contracts for [P] the contract is the contract of [P], and not that of [A]; and, prima facie, at common law the only person who may sue is [P], and the only person who can be sued is [P]. To that rule there, of course, many exceptions…[One such exception is] where [P] is an undisclosed principal”.
Rix LJ in Cumbria Roofing Ltd v Athersmith [2005]
“the law relating to the liability of [A] of an unidentified principal is somewhat different from the law relating to [A] of an undisclosed principal.”
Armstrong v Stokes (1873)
Effect of UA = P ncurs liability to X
Blackburn LJ: “where [X] discovers that in reality there is an undisclosed principal behind, he is entitled to take advantage of this unexpected godsend”
Lord Lloyd in Siu Yin Kwan v Eastern Insurance Co Ltd [1994]
“The law can be summarised shortly.
(1) An undisclosed principal may sue and be sued on a contract made by [A] on his behalf, acting within the scope of this actual authority.
(2) In entering into the contract, [A] must intend to act on [P’s] behalf.
(3) [A] of an undisclosed principal may also sue and be sued on the contract.
(4) Any defence which [X] may have against [A] is available against his [P].
(5) The terms of the contract may, expressly or by implication, exclude [P’s] right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that [A] is the true and only [P].”
Note that liability remains between A and X, so the doctrine can be seen as allowing P to intervene in the A-X contract
Rationale for UA?
Seen as anomylous
Leggatt J in Magellan Spirit v Vitol (2016)
“The proposition that a party to a contract should have rights against and obligations towards a principal of the other contracting party whose existence was not disclosed when the contract was made is out of harmony with the objective approach of modern English commercial law. It runs contrary to the salutary principle that ‘civil obligations are not to be created by or founded upon undisclosed intentions’: Keighley Maxstead & Co v Durant [1901] AC 240, 247, per Lord Macnaghten. Nevertheless, the doctrine is firmly established.”
Lord Lindley in Keighley v Durant (1901)
“The explanation of the doctrine that an undisclosed [P] can sue and be sued on a contract made in the name of another person with his authority, is that the contract is in truth, although not in form, that of the undisclosed [P] himself…. In allowing [P] to sue and be sued upon it, effect is given, so far as he is concerned, to what is true in fact, although that truth may not have been known to the other contracting party… [T]here is an anomaly in holding one person bound to another of whom he knows nothing and with whom he did not, in fact, intend to contract. But middlemen, through whom contracts are made, are common and useful in business transactions, and in the great mass of contract it is a matter of indifference to either party whether there is an undisclosed principal or not. If he exists it is, to say the least, extremely convenient that he should be able to sue and be sued as [P]”
Diplock LJ in Freeman and Lockyer v Buckhurst Park Properties Ltd [1964]
“It may be that this rule relating to ‘undisclosed principals’, which is peculiar to English law, can be rationalized as avoiding circuity of action, for [P] could in equity compel the agent to lend his name in an action to enforce the contract against [X], and would at common law be liable to indemnify the agent in respect of the performance of the obligations assumed by the agent under the contract.”
Does it matter in practice to X that there is an undisclosed principal behind P?
In the ordinary commercial contracts A may assume willingness of X to enter into the contract with either A or undisclosed P:
Diplock LJ in Teheran-Europe v ST Belton [1968]: ”Where an agent has… actual authority and enters into a contract with another party intending to do so on behalf of his principal, it matters not whether he discloses to the other party the identity of his principal, or even that he is contracting on behalf of a principal at all, if the other party is willing or leads the agent to believe that he is willing to treat as a party to the contract anyone on whose behalf the agent may have been authorised to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed by the agent unless either the other party manifests his unwillingness or there are other circumstances which should lead the agent to realise that the other party was not so willing.”
Keighley v Durant (1901)
Earl of Halsbury
re the extent of UA doctrine
A must act w/in scope of his AA
“[A] made a contract on his own behalf and without the authority of anybody else. The contract was made and the parties to it ascertained, and I am of opinion that upon no principle known to the law could [P] be made party to that contract…It is suggested by the judgment of the Court of Appeal as possible, that what is described as ratification might, if the parties had so pleased make the contract, which was one made between [A] and [X] to include [P] as one of the contracting parties. I think such a suggestion is contrary to all principle…
I confess I do not see the relevancy of the argument that a contract might be made in the name of an unknown principal [where A acts within authority], and that such [P] may sue and be sued, though the name was not given at the time the contract was made. The fact is that in such a case the contract is made by him, and the disclosure afterwards does not alter or effect the contract actually made. Here [i.e. where A acts without authority in his own name] it would alter the contract afterwards and make it a different contract.”
Dillon LJ in Welsh Devlopment v Export Finance (1992)
“It is clear law that the doctrine of subsequent ratification, in the law of agency, only applies where the contracting party has expressly made a contract as [A] for another.”
Even if A acts within AA a UP cannot intervene on A-X con in some circumstances
What are they?
(i) A-X contract expressly or impliedly excludes intervention of a UP on the contract
(ii) The personality of A is importnat to X
(iii) The personality of UP is important to X
The Osprey (1994)
“The short answer to [the argument by the counsel for insurers] lies in a finding by the judge that the actual identity of the employer was a matter of indifference. It was not material to the risk. ‘Eastern would have been content’ [judge] said ‘to insure the employer of the crew of the Barquentine Osprey, whoever it was, provided that it was satisfied with the answers given in… the proposal form.’ In the light of that finding it is impossible for the insurers to contend that this was a ‘personal’ contract of the kind that excludes the rights of an undisclosed principal.”
Archer v Stone (1898)
The court will not compel X to perform contract where upon conclusion of contract X asked A whether she/he is acting for a particular P and A untruthfully denied.
Dyster v Randall (1926)
Contrast w Archer v Stone
P employs A to negotiate purchase of land for P because he knew X would not sell land to P – after contract concluded X discovered truth and refused to perform the contract – Lawrence J ordered that X must specifically perform the contract: at 939: “[M]ere non-disclosure as to the person actually entitled to the benefit of a contract for the sale of real estate does 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”.
Said v Butt (1920)
Said became a persona non grata at Palace Theatre – employed A to buy tickets on Said’s behalf but A’s own name in order to see a new play – Said was ejected from the theatre – claimed damages. McCardie J held that Said as undisclosed principal could not intervene – the contract was one where the personal element was “strikingly present”
Colemann J in National Oilwell v Daby Offshore (1993)
Re how to show A intended to act on behalf of P
“Evidence as to whether in any particular case the principal assured or other contracting party did have the requisite intention may be provided by the terms of the policy itself, by the terms of any contract between the principal assured or other contracting party and the alleged co-assured or by any other admissible material showing what was subjectively intended by the principal assured”
Leggatt J in Magellan Spriti v Vitol
Re how to show A intended to act on behalf of P
“It is one thing to infringe the objective principle – as the doctrine of undisclosed principal undoubtedly does – by allowing the existence of contractual rights and obligations to depend on an intention which is not communicated to the other contracting party. But it would go a step further, and would give rise to wholly unacceptable uncertainty, if such rights and obligations were to depend on a purely private intention of the supposed agent which was not even communicated to the supposed principal before the contract was made…The question whether an undisclosed agency relationship was created must depend in principle, as I see it, not on the state of mind of the supposed agent at the time of contracting, but on whether the supposed agent had communicated to the supposed principal an intention to contract on its behalf.”
But this is obiter. Note that the existence of the contractual obligations and rights does not depend on A’s intention to act for P – only whether those obligations and rights are owed by and to P. Also, note that the requirement of A intending to act on behalf of P is separate from the requirement of A acting within actual authority.
Watteau v Fenwick (1893)
The “puzzling” case
claim brought by X v P for price of cigars provided to hotel in Stockton-upon-Tees – X dealt with A and was unaware of P – A was former owner of hotel but continued to run hotel after the sale – P had expressly forbidden A to buy cigars on credit – X succeeds in claim v P – decision described as “puzzling” by Bingham J in The Rhodian River [1984]
Possible bases for A’s liability
i. Action for deceit if A acted fraudulently
ii. Negligence (for elements of claim see Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd [1964]: “The law will imply a duty of care when a party seeking information from a party possessed of special skill trusts him to exercise care, and that party knew, or ought to have known that reliance was being placed on his skill and judgment.”)
iii. Breach of warranty of authority – A purports to act on P’s behalf without authority
iv. A contracted personally alongside P, engaging his/her liability as well as that of P
Lord Esher MR in Firbank’s Executors v Humphreys (1887)
: “Where a person by asserting that he has the authority of [P] induces [X] to enter into any transaction which he would not have entered into but that assertion, and the assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook that it was true, and he liable personally for the damage that has occurred”
A isn’t an actual A for the P
But A acts like they have authority to 3P
So A will be liable for the untrue representation that induced 3P to enter into the contract
A might even make this representation innocently, e.g. their authority is revoked and no one tells them, doesn’t matter that A acts in good faith
So if A has induced 3P to enter into transaction then A is liable strictly
Must X be induced into a transaction with P for whom “A” acted (albeit without authority)?
See Penn v Bristol & West Building Society [1997]
solicitor who believed he acted for both husband and wife (but really husband forged wife’s signature, so he was not) was liable for breach of warranty of authority to the purchaser’s building society which advanced money - Waller LJ at 1363: “the question whether a warranty of authority has been given rests on a proper analysis of the facts in any given situation, and not on any preconceived notions as what is essential as part of the factual analysis. Of course there is no issue that to establish a warranty of authority as with any other collateral warranty there must be proved a contract under which a promise is made either expressly or by implication to the promisee, for which promise the promisee provides consideration. But consideration can be supplied by the promisee entering into some transaction with a third party in a warranty of authority case just as it can in any other collateral warranty case.”
Can A undertake to incur liability to X?
Yeah, if A undertakes to be personally liable, but also makes P liable, freedom of contract means both of them will be.
Law allows 3P to choose between them.
Might choose P bc he is key person, might choose A because he deal directly w him
May LJ in Foxtons Ltd v Thesleff [2005]
]: “that [A] should not be liable because he was agent to the disclosed principal [is] of course, normally… the position in law. But there is no principle of law which says that parties may not contract on the explicit basis that the agent also is liable”.
