The Equity Of The Undisclosed Principal

AuthorP. F. P. Higgins
Publication Date01 Mar 1965
DOIhttp://doi.org/10.1111/j.1468-2230.1965.tb01053.x
THE
EQUITY
OF
THE
UNDISCLOSED PRINCIPAL
THE doctrine of the undisclosed principal has been classified as an
anomaly and in
so
far as it enables a person, who is not apparently
a party to a contract and who is not even expressed to take a
benefit under it,
to
acquire rights and. obligations
vis-ci-vis
another
person who is unaware of
his
existence, the doctrine is clearly
anomalous in the context
of
the strict common law rules
of
contract.’ However, in
all
contracts where an agent
is
involved,
because of the fiduciary duty owed by
an
agent to
his
principal,
it
is not only the common law rules of contract that have to be
considered but also the rules of equity.
It
is submitted that da-
culties that have arisen with regard to the doctrine are attributable
either to a failure to recognise the equity involved
or
to a lack of
appreciation of the full extent of the equitable rules that may be
applicable.
It
is the object of this article to demonstrate that the doctrine
is
in complete accordance with the rules
of
equity in their present
state of development and that cases such as
Watteau
v.
Fenwick
and
Edmunds
v.
Bushell,=
which have been criticised as unwarrant-
able extensions of the doctrine,‘ can be justified by an application
of the modem rules of equity. Conversely, it is hoped to show that
where, as in
Armstrong
v.
stoke^,^
the equitable implications of the
fiduciary duty, owed by an agent to
his
principal, are not fully
considered, error inevitably results.
Sir
Frederick Pollock was of opinion
‘‘
that the whole English
law as to the position of undisclosed principals is an anomaly.
Whether it be a beneficial anomaly is a question to be decided with
reference rather to mercantile than to legal principles.” This
view,
in
contrasting legal principles and mercantile principles, raises
the problem as to what are mercantile principles and how they can
be identified. The truth is that mercantile priqciples and practices
can have
no
impact upon legal doctrines, be those doctrines orthodox
1
The writer adopts the view, advanced by Goodhart and Hamson, that the
contract
as
such is between the agent and the third party and that, when it is
said that there is
priaity in contract
between
an
undisclosed principal
and
the
third arty, it ia ,merely
an
elli tical phrase to indicate their mutual rights
and ohigations.
Undisclosed
hncipals in Contract
(1932)
4
Cmmb.L.J.
320.
Cf.
Chesdire and Fifoot,
Lam
o
contract,
6th
ed.,
p.
403;
Holmes,
Ames,
Undisclosed Principal-His Rights and Liabilities
(1909)
18
Yale
L.J.
448.
Select E!says in Anglo-American Lega
f
Hiatory,
Vol.
6,
p.
404;,,
James Barr
2
18931 1
Q.B.
346.
8
[1865)
L.R.
1
Q.B.
97
5
(1872)
L.R.
7
Q.B.
588.
8
(1898) 14
L.Q.R.
6.
4
poilock
(1893)
9
L.Q.R.
111.
167

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