THE UNDISCLOSED PRINCIPAL*
| Author | W. Müller‐Freienfels |
| DOI | http://doi.org/10.1111/j.1468-2230.1953.tb02124.x |
| Date | 01 July 1953 |
| Published date | 01 July 1953 |
THE
IJNDISCLOSED
PRINCIPAL
*
A.
THE
PROBLEM
STATED
‘‘
A
PROPHET
is not without honour, save in his own country ”-this
biblical truth is nowadays again illustrated in the field of legal
institutions by
‘‘
undisclosed agency.” While Germany and France
are admiring
it
more and more,
it
is losing favour in its
own
mother
country and in the
U.
S.
A.
The present appreciation of undisclosed agency in England is
well known.
No
decision and no textbook omits to call it expressly
“
an anomaly in the law of contracts,” out of harmony with basic
legal principles. Lord Lindley stated in
Keighley,
Maxsted
&
Co.
v.
Durant
“there is an anomaly in holding one person bound to
another of whom he knows nothing and with whom he did not
intend to contract.” Likewise the general attitude of textbook
writers
is
expressed by Cheshire and Fifoot
:
“
The doctrine
of
the
undisclosed principal
is
anomalous in the sense that it allows a per-
son to sue and to be sued upon a contract that he has not in fact
made.” In particular Sir Frederick Pollock has repeated several
times that
“
the plain truth ought never to be forgotten-that the
whole law
as
to the rights and liabilities
of
an undisclosed principal
is
inconsistent with the elementary doctrines of the law of contract.
The right of one person to sue another
on
a contract not really made
with the person suing is unknown to every other legal system
except that of England and America.” Oliver Wendell Holrne~,~
has assumed
“
that common sense is opposed to allowing a stranger
to my overt acts and to my intentions, a man of whom
I
have
never heard, to set up
a
contract against me which
I
had supposed
1
was making with my personal friend
”
and James Barr Ames
has added that whenever an established doctrine ignores, as this
doctrine
of
the undisclosed principal ignores, fundamental legal
*
This article waa written during my
stay
aa
a
visiting professor at the
London
School of Economica and Political Science during the academic year of 1951-62.
I
must expresa my sincere appreciation of the assistance given
by
my
col-
leaguea
in
the Law Department. See
also
my article:
“
Die
‘
Anomalie
’
der
verdeckten Stellvertretnng dea engliachen Rechta
”
in Rabel’a
Zeitschrift,
1952
part
4,
1953 part
1.
1
[1901]
A.C.
240.
2
Street,
Foundations
of
Legal Liability,
11,
478;
Goodhart and Hamaon, 1932,
4
Camb.L.J.
320;
Huffcut
on Agency,
2nd ed., p. 158;
Salmond and Williams,
?od
ed.,
p.
409;
Williston,
A
Treatise
on
the
Law
of
Contracts,
1936,
pp.
278,
809.
3
Law
of
Contract,
2nd
ed.. p. 369.
4
3
L.Q.R.
p.
359;
14
L.Q.R.
p.
6.
J
6
18
Yale Law Journal
443
(1909).
The Hiat.org of Agency
”
in
Select Essays
in
Anglo-American Legal History,
Vol.
6,
p.
404.
299
800
THE
MODERN
LAW
REVIEW
VOL.
16
principles, 6cit is highly important that
it
should
be
recognised
as an anomaly.”
On the other hand, Continental jurisprudence esteems the
institution of undisclosed agency very highly. French lawyers
‘a
consider it
“
une institution essentiellement pratique, efficace, qui
est tout entier dirigk vers les solutions les plus favorables au crkdit
commercial.” Lkvy-Ullmann
‘
acknowledges
it
as an
“
original
institution” and Popesco-Ramniceano8 sees in
it
the key for the
understanding of the agency problem
‘‘
qui a
fait
coder tant d’encre
sur
notre view continent.” German lawyers, moreover, look
on
it as
an
institution which may well serve as
a
model for the develop-
ment of the law. They expressly emphasise that
“it
is
no
anomaly.”
“
nicht als regelwidrig erscheint, sondern
im
Gegenteil in
feinsinniger Weise der jeweiligen Interessenlage angepasst ist.
”
Therefore they consider
it
a
highly valuable institution of great
practical application, which represents in several respects the
type “to which the modern German doctrine gradually tends
after having discovered the inadequacies of the present solution.”
In
this way, the institution of
‘‘
undisclosed agency
”
plays the
r61e of a prophet offering a solution of urgent problems of
our
day.
This view
is
supported by the fact that the idea behind all these
arguments
is
the attempt to
fit
the model of contract developed
under the reign
of
Roman law into the various aspects of modern
social life. The social function of contract at the present day
requires the extension of the contractual
“
vinculum
juris.”
The
individual tw+party relationship must be transformed into a multi-
party relationship, and here, undisclosed agency makes
a
highly
valuable contribution. For
it
allows
a
third party not only to sue
the agent and be sued by the agent who has acted in his own
name, but also
to
sue and be sued by the undisclosed principal
himself who stands behind the scene.
It
is
the undisclosed prin-
cipal who gets the advantages and disadvantages of the contract
in
the end. He is the one
who
authorised the agent and thereby
induced the whole transaction, although he was not mentioned in
the contract. Therefore he is not
in
the position of a complete
stranger to the contract like every other person-as it is maintained
by those who rely upon the “meeting of the mind theories,”
88
Jambu-Merlin, in Hamel,
Le
contrat de commission,
Paris
1949,
p.
326.
7
“
La
contribution essentielle du droit anglais
B
la thborie gbnbrale de la
representation dans les actes juridiques
”
in
Acta academiae unioersalis juris-
prudentiae comparatioae,
Vol.
1, 1928,
p.
341.
8
Popesco-Ramniceano,
De
la reprhsentation dans
les
actes juridiques,
Paris
1927.
9
Wiirdinger,
Geschichte der Stelloertretung (agency)
in
England,
Marburg
1933,
pp.
412, 428, 444.
In similar sense
R.
Miiller-Erzbach,
Die
Grundsutze
der mittelbaren Stelloertretung aus der Znteressenlage entwickelt,
Berlin
1905,
p.
56
;
Klausing in
Rechtsoergleichendes Handworterbuch,
Vol.
3,
pp.
379,398
;
Ruhl,
Eigentumsoorbehalt und Abzahlungsgeschaft,
pp.
48
et seq.
;
some-
thing more reserved Schmidt-Rimpler in
Ehrenberg’s Handbuch
V,
11,
1,
p.
604
and Rabel’s
Zeitschrift
1937,
p.
748
et seq.
Dolle
Festschrift Fritz Scbulz
1951,
p.
277.
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