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Undisclosed Principals in Contract

Published online by Cambridge University Press:  16 January 2009

A. L. Goodhart  and
C. J. Hamson
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Extract

THE comparatively recent case of Collins v. Associated Greyhound Racecourses, Ltd. has raised in a forcible manner two old difficulties—namely, the legal position of undis–closed principals, and, as a corollary, the meaning of ‘person–ality,’especially in contracts involving undisclosed principals.

We are here concerned with a situation in which A, an undisclosed principal, employs B, an agent, to contract with C, a third party, in B's own name. By ‘undisclosed principals’ here are meant principals whose existence is not known to the third party and not principals who, known to be existent by the third party, are nevertheless not identified by name. By ‘agent’ is meant a person who in his own name contracts ostensibly for his own account, but behind whom there stands an undisclosed principal.

Before discussing Collins' Case we propose first to examine the general position of undisclosed principals.

Type
Research Article
Information
The Cambridge Law Journal , Volume 4 , Issue 3 , November 1932 , pp. 320 - 356
Copyright
Copyright © Cambridge Law Journal and Contributors 1932

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References

1 [1930] 1 Ch. 1.

2 See Keighley Maxsted & Co. v. Durant, [1901] A. C. 240.

3 (1743) 2 Stra. 1182.

4 Rabone v. Williams (1785) 7 T. R. 360.

5 Mawman v. Gillett (1809) cited 2 Taunt. 325; Lloyd v. Archbowle (1810) 2 Taunt 324.

6 Lloyd v. Archbowle (1810) 2 Taunt. 324, 327.

7 (1813) 1 M. & S. 249.

8 Per cur. (1821) 4 B. & Ald. 437; followed in Cothay v. Fennell (1830) 10 B. & C. 671.

9 (1833), 5 B. & Ad. 389.

10 In Rabone v. Williams (supra) cited in George v. Clagett (1797) 7 T. R. 359, which see in 2 Smith L. C. (13th ed.) 131.

11 See Scrimshire v. Alderton (supra), 2 Stra. 1182.

12 See Brice v. Bannister (1878) 3 Q. B. D. 569.

13 Maanss v. Henderson (1801) 1 East 335 (but simply a general knowledge that the agent acts sometimes as a factor is not sufficient to bar set–off; see Moore v. Clementson (1809) 2 Camp. 22, at p. 24); Semenza v. Brinsley (1865) 18 C. B. (n.s.) 467; Mildred v. Maspons (1883) 8 App. Cas. 874, esp. at p. 888.

14 Cooke v. Eshelby (1887) 12 App. Cas. 271.

15 This last proviso is doubtful. It does not mean that the purchaser is bound by constructive notice of the agency. It is clear that he is not bound by such notice Greer v. Downs Supply Co. [1927] 2 K. B. 28, and the cases there cited) though an imputed knowledge is sufficient to bind him Dresser v. Norwood (1864) 17 C. B. (n.s.) 466; Moore v. Clementson (1809) 2 Camp. 22).

16 E.g. in Baring v. Corrie (1818) 2 B. & Ald. 137; Escot v. Milward (1783) Esp. Digest, 107, cited in George v. Clagett (supra) note 10.

17 See further, below.

18 [1912] 1 K. B. 181.

19 Blackburn v. Scholes (1810) 2 Camp. 341; Taylor v. Kymer (1832) 3 B. & Ad. 320.

20 Coates v. Lewes (1808) 1 Camp. 444.

21 Dyster v. Randall [1926] Ch. 932.

22 On election, which is not material to be here further discussed, see Paterson v. Gandasequi (1812) 15 East 62 in 2 Smith L. C. (13th ed.) 322.

23 (1803) 1 Sch. & Lef. 123.

24 At p. 128.

25 At p. 131.

26 In Dowell v. Dew (1842) 1 Y. & C. C. C. 345; 12 L. J. Ch. 158, Knight–Bruce V.–C. followed Lord Redesdale. In Crosbie v. Tooke and Morgan v. Rhodes (1833) 1 My. & K. 431, 435, specific performance of agreements for a lease was given though the original contractor had become bankrupt. These cases do not contradict the rule above stated. In Buckland v. Papillon (1866) L. R. 1 Eq. 477; 2 Ch. App. 67, an objection ore tenus by the defendant for want of parties was overruled. This objection, if it had been properly taken, ought no doubt to have been allowed. Fry, Specific Performance, seems to state the result of these cases correctly in § 227: quaere as to §229.

27 Saunderson v. Griffiths (1826) 5 B. & C. 909; Heath v. Chilton (1844) 12 M. & W. 632.

28 Keighley Maxsted & Co. v. Durant [1901] A. C. 240.

29 [1900] 1 Q. B. 629.

30 [1901] A. C. 240, 244.

31 See e.g. Bateman v. Phillips (1812) 15 East 272; Garrett v. Handley (1825) 4 B. & C. 664.

32 Culder v. Dobell (1871) L. R. 6 C. P. 486; Wilson v. Hart (1817) 7 Taunt. 295.

33 Higgins v. Senior (1841) 8 M. & W. 834.

34 Coombs v. Wilkes [1891] 3 Ch. 77; Potter v. Duffield (1874) L. R. 18 Eq. 4, where though the decision is correct Jessel M.R.'s general remarks are much too large.

35 Filby v. Hounsell [1896] 2 Ch. 737.

36 Humble v. Hunter (1848) 12 Q. B. 310; Formby v. Formby (1910) 102 L. T. 116. Quare if a co–owner would have been admitted to intervene?

37 Drughorn v. Rederi. Trans–Atlantic [1919] A. C. 203; and see further below at p. 356.

38 Heald v. Kenworthy (1855) 10 Exch. 739; and see discussion in Irvine v. Watson (1880) 5 Q. B. D. 414.

39 Below at pp. 328 sqq.

40 52 & 53 Vict. c. 45.

41 (1787) 2 T. R. 63.

42 E.g. Swan v. North British Australasian Co. (1863) 2 H. & C. 175.

43 There could, of course, be such a rule without in any way upsetting the doctrine of trusts.

44 Ex p. Dixon (1876) 4 Ch. D. 133, discussed in Stevens v. Biller (1883) 25 Ch. D. 31.

45 This is intended as a general statement and not as an accurate account of the numberless cases dealing with the subject.

46 Paterson v. Tash (1743) 2 Stra. 1178.

47 Martini v. Coles (1813) 1 M. & S. 140; Shipley v. Kymer (1813) 1 M. & S. 484.

48 See e.g. Shipley v. Kymer (supra).

49 Compare e.g. Jewan v. Whitworth (1866) L. R. 2 Eq. 692, with Macnee v. Gorst (1867) L. R. 4 Eq. 315.

50 (1813) 1 M. & S. 484.

51 See George v. Clagett (supra, note (9)) in Smith L. C.

52 For an example see Ecossaise S.S. Co., Ltd. v. Lloyd, Low & co. (1890) 7 T. L. R. 76.

53 (1878) 8 Ch. D. 286, 310–311; see also Parker v. Kett, 1 L. Raym. 658; Ex p. Sutton (1788) 2 Cox 84; Henderson v. Barnewall (1827) 1 Y. & J. 387; Burial Board of St. Margaret's v. Thomson (1871) L. R. 6 C. P. 445; Quebec and Richmond R. R. Co. v. Quinn (1858) 12 Moo. P. C. 232.

54 (1843) 9 C. & F. 818.

55 At p. 845.

56 (1881) 7 Q. B. D. 374. This case must be taken strictly on the point of authority, for here, as the jury found, the defendant knew that the factors were acting as factors.

57 At pp. 380–381.

58 [1901] A. C. 240 (supra). 59 (1815) 6 Taunt. 147: and see Cull v. Backhouse there cited at p. 148.

60 (1832) 3 B. & Ad. 354.

61 Among other cases where direct suit was not allowed see Cartwright v. Hateley (1791) 1 Ves. Jun. 292; Bramah v. Abingdon, cited 15 East, at p. 66; Cockran v. Irlam (1813) 2 M. & S. 301 (a confused case); Solly v. Rathbone (1814) 2 M. & S. 298: Mason v. Clifton (1863) 3 F. & F. 899; and Watson's case (1881) 7 Q. B. D. 374, supra.

62 As he had in De Bussche v. Alt (1878) 8 Ch. D. 286, 310–311 (supra).

63 [1893] 2 Q. B. 350. For the purpose of stating the case shortly Montagu is taken to be the principal. There was in fact a principal behind Montagu; but that in no way affects the decision.

64 At pp. 355–6.

65 See Westwood v. Bell (1815) 4 Camp. 349 and cases there cited.

66 (1885) 10 App. Cas. 617: so far as the goods ex Beaconsfield only are concerned.

67 At p. 636.

68 [1893] 2 Q. B. 350.

69 (1885) 10 App. Cas. 617.

70 At p. 627. Lord Bramwell's judgment, however, even upon this view, raises notable difficulties.

71 (1797) 7 T. R. 359 (supra).

72 (1881) 7 Q. B. D. 374 (supra).

73 See, e.g. Macnee v. Gorst (1867) L. R. 4 Eq. 315 (supra).

74 Keighley Maxsted & co. v. Durant [1901] A. C. 240 (supra).

75 [1893] 1 Q. B. 346.

76 [1901] A. C. 240.

77 [1910] 2 K. B. 889; but see appeal in [1911] 1 K. B. 459.

78 In Kymer v. Suwercropp (1807) 1 Camp. 109; see also Waring v. Favenck, ibid. 85.

79 In this case the broker bought in his own name and apparently as principal.

80 (1855) 10 Exch. 739.

81 At p. 745.

82 (1807) 1 Camp. 109; see also Waring v. Favenck, ibid. 85.

83 There may be an estoppel by judgment before disclosure of the principal: per Lord Cairns in Hamilton v. Kendall (1879) 4 App. Cas. 504, 514.

84 (1829) 9 B. & C. 78.

85 (1872) L. R. 7 Q. B. 598.

86 (1855) 10 Exch. 739.

87 (1880) 5 Q. B. D. 414

88 At p. 421.

88a (1872) L. R. 7 Q. B. 598.

89 At pp. 420–421.

90 13th ed. at p. 180.

91 (1872) L. R. 7 Q. B. 598.

92 Unless A has in his contract with B acquired against B either expressly or by statute or by law merchant a right at his own wish to substitute another's liability for his own, or unless the privity between A and B is simply a privity of estate.

93 It is admittedly difficult to determine whether a particular contract is personal in the third and fourth senses above—for a recent discussion see Graves v. Cohen (1930) 46 T. L. R. 121, but the categories of personality into which particular contracts may fall are clearly established.

94 Williston, Contracts (1920 ed.) § 286, at p. 551.

95 Archer v. Stone (1898) 78 L. T. 34; where note that the agent B was suing.

96 Nash v. Dix (1898) 78 L. T. 445; Dyster v. Randall [1926] Ch. 932.

97 See Lord Eldon's remarks in Bonnett v. Sadler (1808) 14 Ves. 526, at p. 528.

98 (1848) 12 Q. B. 310: see above, p. 327. But as regards charterparties, it now seems that such terms will not be implied: see Fratelli Sorrentino v. Buerger [1915] 1 K. B. 307.

99 Cited in Smith v. Wheatcroft (1878) 9 Ch. D. 223, 230; Gordon v. Street [1899] 2 Q. B. 641, 647.

1 (1878) 9 Ch. D. 223.

2 [1919] 2 K. B. 243.

99a See note 96.

1 (1878) 9 Ch. D. 223.

3 [1920] 3 K. B. 497; and see infra, p. 349.

4 (1878) 9 Ch. D. 223.

5 Supra, p. 343.

6 Infra, p. 350.

7 (1857) 2 H. & N. 564.

8 [1899] 2 Q. B. 641.

9 Cundy v. Lindsay (1878) 3 App. Cas. 459.

10 Boulton v. Jones (1857) 2 H. & N. 564.

10a See note 96.

11 See, e.g. Durant's Case [1901] A. C. 240.

12 [1920] 3 K. B. 497; see below, p. 349.

13 (1898) 78 L. T. 445.

14 [1926] Ch. 932.

15 (1844) 1 Coll. C. C. 203, at p. 220.

16 Irnham v. Child (1781) 1 Bro. C. C. 92.

17 Collins v. Associated Greyhound Racecourses, Ltd., [1930] 1 Ch. 1, at p. 37.

18 (1891) 7 T. L. R. 263.

18b The very vexed question—Whether the third party can set off against the agent suing in his own name a debt owed to the third party by the undisclosed principal—seems to be further evidence that the contract is not between the undisclosed principal and the third party: see the cases cited in 2 Smith L. C. (13th ed.) pp. 137–139.

19 [1920] 3 K. B. 497.

20 The question might perhaps, as summarily, have been answered as follows: No: in the circumstances, by his conduct, Pollock in this contract between himself and the Palace Theatre made a representation that he, Pollock, and he, Pollock, alone, had any interest in this contract.

21 Supra, pp. 344–345.

22 Ibid.

22a Supra, p. 344.

23 (1857) 2 H. & N. 564.

24 [1899] 2 Q. B. 641.

25 At p. 644.

26 (1898) 78 L. T. 34.

27 [1919] 2 K. B. 243.

28 (1816) 1 Star. 434.

29 (1904) 20 T. L. R. 385.

30 (1826) 1 Sim. 63.

31 (1844) 1 Coll. C. C. 203.

32 Supra, p. 348.

33 [1930] 1 Ch. 1.

34 Mason and Ovington endorsed the allotment letter to Collins, so that Collins, when entered upon the company's register on January 18, was in fact the first name to be entered therein in respect of the shares allotted to M. and O. But it was held that the endorsement operated as a transfer, that this transfer was not, so far as the company was concerned, made on the basis of the prospectus, and that therefore Collins could not claim to have the contract (if any) entered into on January 18 rescinded because of a misrepresentation in the prospectus. We are here concerned solely with the contract completed on December 17 and Collins' position as undisclosed principal in that contract.

35 At p. 37. Whether Mason and Ovington could have proved their allegation by proving that Collins, their ‘mind’ in this matter, had been misled by the prospectus,quaere.

36 At p. 19.

37 At p. 33.

38 At p. 36.

39 (1803) 1 Sch. & Lef. 123.

40 Drughorn v. Rederi. Trans-Atlantic [1919] A. C. 203, at p. 206.