Usually, the third party in most commercial contracts there is not much concern about the existence or identity of the undisclosed principal. The papers therefore sets out to explore how the third party can be protected by law and analyze the possibility and legality of having the undisclosed principal’s identity be revealed oblingly.As it is, the law in commercial contracts allows for; the undisclosed principal to sue and be sued as long as the contracting agent retains authority in matters at hand; defense held by third parties against the agents principal; suing of agent of undisclosed principal by third party is in dependence with third parties election and terms of contract may not hold the principal being liable to being sued or having right to sue, with academic studies and past case laws forming the basis of authorities’ sources.
Basically an agent is a person appointed by a seller to represent his/her interest in dealings with the other party on consent and agreement as Bowstead and Reynold defines .The agency can represent the sellers’ interest by either, executing the contract as a legal representative of open agent or as an undisclosed principal on implied assumption of that identity.
Principles of undisclosed principal.
The doctrine of privacy of contracts which states that “A person may enforce a contractual promise and obtain remedies for its breach, even when made for the person’s benefit, if he is not party to the contract.”1 Despite the doctrine of undisclosed principal being in conflict with the laws of privity of contracts, the rules of this principle are accommodated by the argument that there exist exemptions for easing convenience in commercial ventures.
Lord Lindley tried to uphold the third party protection by stating in Keighley Maxtead & co V Durant2 that it mattered little in existence of undisclosed principal or its lack when it comes to contracts of great mass and stressed on the need for the ability of the principal to be sued and sue with no perversion of the course of the law whatsoever.
Limitations in the doctrine of undisclosed principle are crucial to protect the third parties rights. As the contract was initially held between the third party and the operating agent, there should be no intervention of the undisclosed principal, contrary to the existing agreement.
Undisclosed principal and third party’s rights and liabilities.
Where the principle is undisclosed, the accrued defenses against the contracting agent can be set-off against the principle up to where the principal steps in with intervening action. However, third party has no right to take the same course of action where he knowingly pursued the contract process with full knowledge or assumption of the agent’s real identity or role played as a go between. A look at the Cooki V Eshuby3 , the third party had ample time of judgment of the undisclosed principle’s background and passive existence as they know of agent’s identity.
Heavy criticism and reprimand was directed towards Armstrong V Stoke4 due to the suggestion that the undisclosed principal would not be liable to third party where the agents fail to give the latter money given by the former to the agent for the payment of the third party’s interests. However, justice and fairness demand the undisclosed principal hold liability in such cases.
Upon intervention of the undisclosed principal, the agent automatically loses the rights of contract against the third party, who can sue either the agent or the principle but not both as the state of affairs is solitary liability to one party at a time. The third party also loses the right to sue one party after he opts to place liability on the other party.
The exclusion of the doctrine of undisclosed principal.
The specific terms of contract can dictate the termination of the applicability or validity of the doctrine of undisclosed principal.
This is well illustrated in the Humble V Hunter5, where the mother of an agent, who had previously been an undisclosed principle, but later, emerged with intent enforcing terms of the contract. The court eventually held the verdict of the unacceptability of undisclosed principal’s intervention.
In a nutshell, existence, or lack of it, of undisclosed principal in commercial contracts is of little or no value at all. The justification of the principle of contract and the undisclosed principal lies squarely in the matter of business and commercial convenience. However, third party’s rights are crucial to preserve commercial integrity and individual interests of third party.