MLL215 Topic 5 Doctrine of undisclosed principals PDF

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Doctrine of undisclosed principals...

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MLL215 Commercial Law

Topic 5 Doctrine of undisclosed principal The law of agency has developed partly because a principal may not wish to conduct their business directly but wishes to remain anonymous until the agreement is finalised. As such, common law has recognised that a valid agency arrangement can exist where the principal is not disclosed to the third party. As a general rule, an undisclosed principal (UP) only has rights and obligations under the contract made between A and T if A has actual authority to enter into it on UP’s behalf either expressly or by implication. As we saw in Keighley, Maxsted & Co v Durant, the doctrine of ratification has no application to UPs, because it requires that no authority was originally given. The doctrine of UP also cannot exist in relation to ostensible authority as this form of authority requires that P makes a representation to T. This would not be possible because UP was not disclosed. The UP doctrine may serve some purpose in allowing commerce to operate even where P wishes to remain anonymous but it sits uneasy with the notion that T maybe contracting with an entity other than the one they are dealing with. It is also important to note that where an agent acts with actual authority for an undisclosed P, the agent may in fact be contracting in their own name until the principal is disclosed.

Prescribed textbook Samantha J Traves, 2020, Commercial Law, 5th edn, Lexis Nexis (referred to as Traves), pp 129-134

Case Sui Yian v Eastern Insurance Co Ltd [1994] 2 AC 199...