Implied Terms in Undisclosed Agency
| Published date | 01 May 2021 |
| Author | Cheng‐Han Tan |
| Date | 01 May 2021 |
| DOI | http://doi.org/10.1111/1468-2230.12609 |
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Modern Law Review
DOI:10.1111/1468-2230.12609
Implied Terms in Undisclosed Agency
Cheng-Han Tan∗
Undisclosed agency is considered anomalous by many and often explained on the basis of com-
mercial convenience.Although some aspects are similar to disclosed agency,the signicant dif-
ferences between them have g iven rise to r ules peculiar to undisclosed agency. The content and
basis of some of these rules are uncertain even if they appear reasonable. This paper suggests
that the rules relating to the principal-third party relationship that are peculiar to undisclosed
agency can be placed on a stronger doctrinal basis if such rules are understood as contractual
terms that are implied in law (mainly). Such analysis is consistent with and supports the broadly
accepted rules that govern the relationship between the undisclosed principal and third party,
and can provide a useful framework within which to resolve those aspects of the relationship
that are uncertain or controversial.
INTRODUCTION
The doctrine of the undisclosed principal, or undisclosed agency, is well known
and established within the common law1even if it is regarded by many as
anomalous.2Thedoctr ine allowsa pr incipal to take the benet of and be subject
to the obligations of a contract entered into by an agent with actual authority
to do so even where the third party, being unaware of the principal’s involve-
ment, dealt with the agent as principal to the contract.3As such, an undisclosed
principal may sue or be sued on a contract to which she was ostensibly not
a party to. Undisclosed agency therefore does not t in well with contractual
notions of consent between contracting parties and the doctrine of privity of
contract. In Family Food Court vSeah Boon Lock, the Singapore Court of Ap-
peal observed that undisclosed agency ‘has been severely criticised as it oends
∗Chair Professor of Commercial Law, City University of Hong Kong. I am grateful to Mindy Chen-
Wishart and the two anonymous MLR reviewers for their very helpful comments. All remaining
errors are mine alone.
1 The leading statement of the doctr ine can be found in Siu Yin Kwan vEastern Insurance Co Ltd
[1994] 2 AC 199 (Siu Yin Kwan), 277, and see also Amer ican Law Institute, Restatement of the
Law Third,Agency (St Paul, MN: American Law Institute Publishers, 2007) (Restatement Third,
Agency) 6.03.
2 Generally, see P. Watts and F.M.B. Reynolds,Bowstead and Reynolds on Agency (London: Sweet
& Maxwell, 21st ed, 2018) 8-068-8-071; G.E. Dal Pont, Law of Agency (Australia: LexisNexis
Butterworths, 4th ed, 2020) 19.28-19.33; L. Macgregor, The Law of Agency in Scotland (Edin-
burgh: W. Green, 2013) 12-25-12-32;A.L. Goodhar t and C.J.Hamson, ‘Undisclosed Principals
in Contract’ (1932) 4 CLJ 320; Tan Cheng-Han, ‘Undisclosed Principals and Contract’ (2004)
120 LQR 480.
3Restatement Third, Agency n 1 above, 1.04 denes an undisclosed principal as one where ‘if, when
an agent and a third party interact, the third party has no notice that the agent is acting for a
principal.’
© 2020 The Author.The Modern Law Review © 2020 The Modern Law Review Limited.(2021) 84(3) MLR 532–552
Cheng-Han Tan
against many contractual pr inciples, including (most notably) the pr inciple of
privity of contract.’4
A number of explanations for the doctrine have been suggested but none has
garnered much support.5It is therefore said that the doctrine is best explained
simply as one of commercial utility and convenience.6A company may wish to
keep its identity secret so that other businesses remain unaware of its plans, or
because it knows that due to some past history the intended counterparty will
either not deal with it or any transaction will be more dicult than usual to
conclude. An agent may also have inadvertently failed to disclose that she was
acting on behalf of another person without this depriving the principal of the
right to enforce the contract directly. Allowing the undisclosed principal the
option of enforcing the contract avoids circuity of action as the principal can
otherwise compel the agent in equity to lend the agent’s name to enforce the
contract,7while also avoiding complications should the agent become insolvent
or pas s away.
Notwithstanding, or perhaps because of undisclosed agency’s commercial
utility, as well as its unusual nature in the context of contract law as it is under-
stood today, there are a number of uncertainties and unresolved issues relating
to the doctrine insofar as they dier from disclosed agency.Many of these issues
relate to aspects of the relationship between the principal and the third party
when the principal’s existence is discovered and either the principal or the third
party wishes to enforce the contract against the other.Even where the rules are
broadly accepted, the basis for such rules has not been ar ticulated beyond the
fact that they are logical (even if points of detail remain unsettled),8and it is
said also that the principle justifying the rules where settlement with or set-o
against the agent has aected the rights of the principal is uncer tain.9
In addition, there is also signicant uncertainty and disagreement over the
nature of the contractual relationship that is formed between the undisclosed
principal and the third party.On the one hand, there are judicial statements to
the eect that the contract entered into is one between the principal and third
party.10 It is also said that the undisclosed principal’s rights under the contract
take precedence over the agent’s such that where the principal wishes to sue on
the contract the agent’s right to do so must give way.11 Nevertheless, the agent
can also sue and be sued on the contract; the third par ty may sue the agent even
4Family Food Court vSeah Boon Lock [2008] 4 SLR(R) 272 at [29].
5 Tan Cheng-Han, The Law of Agency (Singapore: Academy Publishing, 2nd ed, 2017) 10.012-
10.027.
6Keighley,Maxsted & Co vDurant [1901] AC 240 (Keighley), 261-262; Bowstead and Reynolds on
Agency n 2 above,8-069; Dal Pont, n 2 above, 19.33; H. Bennett, Principles of the Law of Agency
(Oxford: Hart Publishing, 2013) 9.21; Macgregor, n 2 above, 12-30.
7Freeman & Lockyer vBuckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 503.
8Bowstead and Reynolds on Agency n 2 above, 8-095 in the context of defences to action by or
against the undisclosed principal.
9ibid, 8-109.
10 For example, see Keighley n 6 above, 244 per Earl of Halsbur y LC, 261 per Lord Lindley; Said v
Butt [1920] 3 KB 497, 500, 503; Gardiner vHeading [1928] 2 KB 284, 290; Teheran-Europe Co Ltd
vS.T. Belton (Tractors) Ltd [1968] 2 QB 545 (Teheran-Europe), 555 (the third party is presumed
willing to treat the undisclosed principal ‘as a party to the contract’).
11 Maynegrain Pty Ltd vCompana Bank [1982] 2 NSWLR 141, 150; CFI Rentals Pty Ltd vRoussos
[2017] QCA 308 at [15]; Food and Beverage Australia Ltd vPJNashPtyLtd[2019] SASC 208
© 2020 The Author.The Modern Law Review © 2020 The Modern Law ReviewLimited.
(2021) 84(3) MLR 532–552 533
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