Undisclosed Agency

Question 1

Montgomerie v UK Steamship (1891)

Answer 1

“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”.

Question 2

Rix LJ in Cumbria Roofing Ltd v Athersmith [2005]

Answer 2

“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.”

Question 3

Armstrong v Stokes (1873)

Answer 3

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”

Question 4

Lord Lloyd in Siu Yin Kwan v Eastern Insurance Co Ltd [1994]

Answer 4

“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

Question 5

Rationale for UA?

Answer 5

Seen as anomylous

Question 6

Leggatt J in Magellan Spirit v Vitol (2016)

Answer 6

“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.”

Question 7

Lord Lindley in Keighley v Durant (1901)

Answer 7

“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]”

Question 8

Diplock LJ in Freeman and Lockyer v Buckhurst Park Properties Ltd [1964]

Answer 8

“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.”

Question 9

Does it matter in practice to X that there is an undisclosed principal behind P?

Answer 9

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.”

Question 10

Keighley v Durant (1901)
Earl of Halsbury
re the extent of UA doctrine

Answer 10

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.”

Question 11

Dillon LJ in Welsh Devlopment v Export Finance (1992)

Answer 11

“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.”

Question 12

Even if A acts within AA a UP cannot intervene on A-X con in some circumstances
What are they?

Answer 12

(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

Question 13

The Osprey (1994)

Answer 13

“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.”

Question 14

Archer v Stone (1898)

Answer 14

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.

Question 15

Dyster v Randall (1926)

Answer 15

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”.

Question 16

Said v Butt (1920)

Answer 16

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”

Question 17

Colemann J in National Oilwell v Daby Offshore (1993)

Re how to show A intended to act on behalf of P

Answer 17

“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”

Question 18

Leggatt J in Magellan Spriti v Vitol

Re how to show A intended to act on behalf of P

Answer 18

“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.

Question 19

Watteau v Fenwick (1893)

Answer 19

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]

Question 20

Possible bases for A’s liability

Answer 20

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

Question 21

Lord Esher MR in Firbank’s Executors v Humphreys (1887)

Answer 21

: “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

Question 22

Must X be induced into a transaction with P for whom “A” acted (albeit without authority)?
See Penn v Bristol & West Building Society [1997]

Answer 22

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.”

Question 23

Can A undertake to incur liability to X?

Answer 23

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

Question 24

May LJ in Foxtons Ltd v Thesleff [2005]

Answer 24

]: “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”.

Question 25

Montgomerie v UK Mutual SS Association Ltd [1891]

Answer 25

A may be added as a party to the contract “if he has so contracted, and is appointed as the party to be sued” - Wright J

Question 26

Whom is X to hold liable?

Answer 26

See Scrutton LJ in Debenham’s Ltd v Perkins [1925]: “When an agent acts for a disclosed principal, it may be that the agent makes himself or herself personally liable as well as the principal. But in such a case the person with whom the contract is made may not get judgment against both. He may get judgment against the principal or he may get a judgment against the agent who is liable as principal….once [X] has got a judgment against either the principal or the agent who has the liability of the principal, he cannot then proceed against the other party who might be liable on the contract…”

Question 27

Is liability of A nad P alternative or joint and several?

Answer 27

Contract may provide for joint and several liability
e.g. Middle East Tankers & Freighters SA v Abu Dhabi Container [2002] (Dean J): no ambiguity where the invoice stated that “the agent shall be jointly and severally liable with the Buyer(s) and not as agent for the due and proper performance of the agreement”: this meant A assumed the duties of the buyer
If contract silent (i.e. the default rule)
See e.g. Bramwell B in Priestley v Fernie (1863): “Where an agent, having made a contract in his name, has been sued on it to final judgment, there can be no doubt that no second action would be maintainable against the principal. The very expression that where a contact is so made the contractee has an election to sue agent or principal, supposes he can only sue one of them, that is to say, sue to judgment”.

Question 28

Basis for default rule of alternative liability

Answer 28

Scrutton LJ in Debenham’s Ltd v Perkins [1925]: “This is sometimes explained by the doctrine of election and sometimes by the doctrine that when one has merged a contract in a judgment, one can have only one judgment, and, having merged the contract in the judgment, one cannot use the contract to get a second judgment. It is unnecessary to consider which is right.”

Question 29

Doctrine of merger?

Answer 29

But see: Civil Liability (Contribution) Act 1978, s3: “Judgment recovered against any person liable in respect of any debt or damage shall not be a bar to an action, or to the continuance of an action, against any other person who is (apart from any such bar) jointly liable with him in respect of the same debt or damage.”

Question 30

Doctrine of election?

Answer 30

Possible critique: (i) X would probably choose to sue both A and B, not A or B; (ii) doubted in relation to undisclosed agency in LC Fowler & Sons Ltd v St Stephens College Board of Governors [1991]

Question 31

What are A’s contractual duties?

Answer 31

Contract between A and P will typically outline duties between the parties ad crucially from A to P
Lord BW in Kelly v Cooper [1993]: “[Where agency does arise by contract], like every other contract, the rights and duties of the principal and agent [as parties to that contract] are dependent upon the terms of the contract between them, whether express or implied”
But not every agency starts with contract.
A might be a volunteer, in which case he has no contractual duties, but may have duties for other reasons
Every A has a duty to execise reasonable care and skill.
Stems from tort law
Straightforward question of whether A acts in way that they know P is relying on their skill and judgment
If A knows they are relying on them, or ought to know it, and don’t act accordingly they will be liable

Question 32

Duty to exercise reasonable care and skill

Answer 32

Duty based on tort of negligence, owed whether or not they are a contractual agent
A owes this duty in the performance of his agency to P

Question 33

Chaudhry v Prabhakar [1989]:

Answer 33

P asks A to help find a second hard car for her but not one that had been involved in an accident
A agrees to do so and does not ask for payment
A finds car and is told the bonnet had been repaired but makes no enquiries
on A’s recommendation P buys the car and later discovers it had been in an accident (and was unroadworthy)
P sued A for negligence.
Held liable, she relied on is skill and judgment n this context
Stuart-smith notes that hthis was not a scoal occasion, this was akin to a business transaction

Question 34

Chaudhry v Prabhakar [1989]: Stuart-Smith LJ

Answer 34

“When considering… whether a duty of care arises, the relationship between the parties is material…where… the relationship of [P] and [A] exists, such that a contract comes into existence between [P] and [X], it seems to me that, at the very least, this relationship is powerful evidence that the occasion is not a purely social one, but… is in a business connection. Indeed the relationship between the parties is one that is equivalent to contract, to use the words of Lord Devlin … save only for the absence of consideration… [as to claim in negligence] all the necessary ingredients are here present. [P] clearly relied upon [A]’s skill and judgment, and, although it may not have been great, it was greater than hers and was quite sufficient for the purpose of asking the appropriate questions of the second defendant… [A] also knew that [P] was relying on him; indeed he told her that she did not need to have it inspected by a mechanic and she did not do so on the strength of his recommendation. It was clearly in a business connection, because he knew that she was there and then going to commit herself to buying the car … through his agency.”

Question 35

Fiduciary duties

Answer 35

Agents are usually fiduciaries but the scope of this FD will depend on nature of the relationship
When fiduciary relationship is found, there are certain duties imposed on every F when they discharge their other non-FDs
That will be not to take unauthorised profits (i.e. no undisclosed commission). If they do there are personal and proprietar claims against A that can be imposed on the profits
There is also a D for F not to place themselves in a position that might conflict with P’s interests

Question 36

Lord Wilberforce in Oranje Inc v Kuy (1973)

Answer 36

“[A fiduciary relationship exists], in principle, [when] the case is one of principal and agent, or master and servant”

Question 37

What do the fiduciary duties do?

Answer 37

Offer a subsidiary and prophylactic form of protection to whatever non-fiducairy duties (usually contractual) that the fiduciary owes his principal

Question 38

Millett LJ, Bristol v Mothew

Answer 38

In respect of their fiduciary’s discharge of whatever non-fiduciary obligations they owe them, ‘the principal is entitled to [their] single-minded loyalty’

Question 39

Can extent of FDs differ?

Answer 39

Yes

See estate agents in Kelly v Cooper

Question 40

Duty to hand over the money received oh behalf of P

Answer 40

A (whether contractual or not) who receives money on behalf of his P or takes profit arising out of A’s acting as agent is, prima facie, under a legal obligation to hand the value of that money over to his P on demand.

Question 41

Morison v Thompson (1873-4)

Answer 41

: “In our judgment … an agent [has] a duty, which we consider a legal duty, clearly incumbent upon him, whenever any profits so made have reached his hands, and there is no account in regard to them remaining to be taken and adjusted between him and his employer, to pay over the amount as money absolutely belonging to his employer… [Where] money in question acquired by [A] in the course of his employment … [thought] it [is] actually in his hands, [it is] subject to an immediate duty to hand it over to his employer. Under such circumstances the money, being the property of the employer, can only be regarded as held for his use by the agent, and must consequently be recoverable in an action for money had and received.”
Note that the duty to hand over the money obtained on behalf of P is prima facie legal obligation (likely based on unjust enrichment)

Question 42

Duty to account in equity?

Answer 42

See Millett LJ in Paragon Finance v DB Thakerer & Co [1999]: “Liability to account [arises] from receipt of money in circumstances which made him an accounting party.”
Penner, ‘Distinguishing Fiduciary, Trust, and Accounting Relationships (2014): “[A will have a liability to account if it is part of his/her agency to] enter into transactions [on behalf of his/her P] which generate receipts which are typically to be divided between the accounting party and [P] (usually in proportions determined by contract), [and] transactions which may also generate disbursements or expenses for which the accounting party is credited”

Question 43

Duty to account and duty to account for profits obtained in breach of fiduciary relationship?

Answer 43

A’s failure to account properly is not a breach of his fiduciary duty (which opens him to various particular liabilities) unless his failure to account was also an act of disloyalty: see Millett LJ, Paragon Finance v D B Thakerer [1999]: “The fact that [A is] a fiduciary [does] not [necessarily] make [any] failure to account a breach of fiduciary duty … His liability to account … did not arise from any breach of duty, fiduciary or otherwise … [A is] merely an accounting party who has failed to render an account.”