Undisclosed Principal: Concepts and Rules
In the ordinary course of agency, the agent needs to disclose all the complete facts regarding his agency, name, and details of the principal to the third party. However, in some cases, the agent may intentionally or unintentionally not disclose the principal’s name. The former agency is similar to the disclosed agency with one dissimilarity that the principal’s details are not revealed. The agent worked on behalf of the undisclosed principal and formulated the contracts with the third parties, and the principal reaps the result of the same. The various relationship that an undisclosed principal has is stated below:
Undisclosed Principal and Agent: the rights and rights, and duties between the agent and undisclosed principal are the same as the agent and the disclosed principal.
Undisclosed Principal and Third Party: in the agency relationship of a third party, undisclosed principal, and third party, the agent must have the actual control.
Agent and Third Party: If the agent does not notify the third party that he is working for an undisclosed principal, the agent will be the principal and can sue and be sued.
Rights and Liabilities of the Undisclosed Principal
Under the Restatement (Third) Agency Laws Section 2.06 of the United States, the concept of the undisclosed principal is mentioned. There are certain rights and liabilities of the undisclosed principal. The rights of the undisclosed principal are stated as follows:
The undisclosed principal can sue the third party for the matters related to the contract, such as the non-performance of the contract.
It is the right of the undisclosed principal to supervise the contract’s work and regulate the agent’s behavior.
Certain liabilities are attached to the undisclosed principal; they are:
The undisclosed principal remains liable to the third party for the price of the goods and services provided under the contract that is made in the agent’s name.
The agent has disclosed the identity; it is stated that the third party can take action for any payable amount and decided under the contract.
The fixing of the rights and the liabilities upon the third party and the undisclosed principal is stated to be of substantial importance.
Ratification by Undisclosed Principal
In the United States, this rule has been followed for more than a hundred years, and there has been no adequacy to find the reasons advanced for the rule. The rules that govern the undisclosed principals have been criticized repeatedly because it fails to differentiate between the disclosed principals and the undisclosed principals. It is also stated that if the principal’s agent has acted without the knowledge of the principal, he is not bound to act. According to the observance of many learners, the rule which states that undisclosed principals do not have the right to ratify the contract, according to the observance of many learners, can be stated as an outdated rule that cannot be sustained in the present legal scenario. To prove that it is an outdated rule, it is stated that the rule goes against the rights and liabilities of the undisclosed principals. The rule seems to have been based on a legal fiction.
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