§ 249. Undisclosed principal's right to hold third person.

§ 243. (Agency, Sec. 59.)

General rule that the third person can hold an undisclosed principal.

Case 238. Kayton v. Barnett, 116 N. Y. 625.

Facts: This action was brought to recover a balance of the purchase price alleged to be due for certain property sold by plaintiffs to defendants. On March 17, 1881 plaintiffs sold and delivered to one Wm. B. Bishop several machines and assigned to him letters patent for $4,500. Bishop paid $3,000 on delivery, and afterwards died insolvent without having paid the balance. Bishop was defendants' agent, but defendants were undisclosed at the time and plaintiffs dealt with Bishop as principal.

Point Involved: Whether when a person deals with another who does not disclose his agency, the principal may upon discovery be held on the contract with the agent.

FOLLETT, CH. J.: When the goods are sold on credit to a person whom the vendor believes to be the purchaser, and he afterwards discovers that the person credited bought as agent for another, the vendor has a cause of action against the principal for the purchase-price. The defendants concede the existence of this general rule but asserts that it is not applicable to this case, because, while

Bishop and plaintiffs were negotiating, they stated they would not sell the property to the defendants, and Bishop assured them he was buying for himself and not for them. It appears by evidence, which is wholly uncontradicted, that the defendants directed every step taken by Bishop in his negotiations with plaintiffs; that the property was purchased for and delivered to the defendants, who have ever since retained it; that they paid the $3,000 towards the purchase-price, and agreed with Bishop, after the notes had been delivered, to hold him harmless from them. Notwithstanding the assertion of the plaintiffs that they would not sell to the defendants, they, through the circumvention of Bishop and the defendants, did sell the property to the defendants, who have had the benefit of it, and have never paid the remainder of the purchase-price pursuant to their agreement. Bishop was the defendants' agent, Bishop's mind was, in this transaction, the defendants' mind, and so the minds of the parties met, and the defendants having, through their own and their agent's deception, acquired the plaintiffs' property by purchase, cannot successfully assert that they are not liable for the remainder of the purchase-price because they, through their agent, succeeded in inducing the defendants to do that which they did not intend to do, and, perhaps, would not have done had the defendants not dealt disingenuously.

Question 238: What is the rule as to the right of the third person to hold an undisclosed principal? Illustrate by the facts of this case?

§ 244. (Agency, Sec. 60.) First exception to rule that third person can hold undisclosed principal.

(Note: The third person cannot hold a principal who was undisclosed at the time the contract was made where after discovering the principal, he chooses to hold the agent. The facts would show whether he had indeed made such an election, and his failure to make any claim against the principal for a considerable period of time would in itself indicate an election to hold the agent.)

§ 245. (Agency, Sec. 61.) Second exception to rule that third person can hold undisclosed principal.

Case 239. Laing v. Butler, 37 Hun (44 N. Y. Sup.) 144.

Facts: Suit to recover the sum of $867.23 as the contract price of a quantity of hides sold by plaintiffs to Edward F. Smith who was the undisclosed agent of the defendants. Defendants had furnished Smith with the money for the hides, but he bought upon credit.

Point Involved: Whether an undisclosed principal who has settled with his agent for the goods bought under the agency, can be held by the third person after such settlement.

"We have thus briefly alluded to some of the authorities both in England and in this country which bear upon the question under consideration. They are the nearest in point of any which we have been able to discover. From them it appears to us that where an agent buys in his own name, but for the benefit of his principal, without disclosing the name of the principal the rule is that the principal as well as the agent will be bound, provided the goods are received by the principal, if the agent in making the purchase acted within his power as agent; but that this rule is subject to the following limitations and exceptions: First, the purchase of the agent must be within the power conferred upon him by his principal, or it must be shown that the principal subsequently ratified his acts. Second, if the principal furnished the agent with the money with which to make the purchase before the purchase, and the agent should, without his knowledge, purchase the property upon credit without disclosing his principal, that the principal will not be bound; and, Third, where the purchase has been made by the agent upon credit, authorized by the principal, but without disclosing his name, and payment is subsequently made by the principal to the agent in good faith before

the agency is disclosed to the seller, then the principal would not be liable. In the case under consideration, it appears that the defendants authorized Smith to purchase the hides for them; that they advanced the money to him with which to make the purchases they had authorized. The plaintiff in selling hides to Smith, sold to him upon his individual credit and promise to pay. The case therefore appears to us to be, within the exceptions to the rule mentioned, and it consequently follows that the plaintiff is not entitled to recover."

Question 239: P supplies A with funds to purchase goods. A, in his own name, acting apparently as principal buys the goods from T on his own credit, supplies the goods to the principal, and disappears with the money supplied by the principal. T then learns of the agency and sues P. Can P be held? Is it justice to T not to make P liable in such a case? Why?

§ 246. (Agency, Sec. 62.) Third exception to rule that the third person can hold an undisclosed principal.

(Note: Only a person named in a sealed instrument can be held upon it. Hence, undisclosed principal could not be held in such a case. No longer true where distinction between sealed and unsealed instruments is broken down.)

§ 247. (Agency, Sec. 63.) Fourth exception to rule.

(Note: An undisclosed principal cannot be held upon negotiable paper signed by his agent as principal. Only a person named or described in a negotiable instrument can be sued thereon.)

§ 248. (Agency, Sec. 64.) Where alleged undisclosed principal had not conferred authority.

(Note: The theory of liability of one as undisclosed principal is that one is indeed at the time the act was done a real principal, and therefore, being a party in interest ought to be held. If he was not a principal, though he afterwards takes the benefit of the act, he is not liable for that reason. An undisclosed principal cannot ratify.)

§ 249. (Agency, Sec. 65.) Undisclosed principal's right to hold third person.

Case 240. Tutt v. Brown, 15 Ky. Reports, 1.
Facts: The facts are stated in the opinion.

Point Involved: The right of an undisclosed principal to sue on the contract.

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BY THE COURT, OWSLEY, J.: "George H. Tutt, the son of the plaintiff, Hansford Tutt, whilst in the service of his father, and for his benefit, contracted with the defendant, Brown, to transport in his father's wagon, a quantity of bagging, to Colonel Pearce, near Huntsville, at a stipulated price to be paid to the said Brown; whilst contracting with Brown nothing was said by George H. Tutt about his being employed in the service of his father, nor does it appear that Brown, at that time or for some time after the bagging was transported to Pearce, knew that the service was performed by the son for the benefit of the father. "Brown failed to pay the said George H. Tutt the price agreed and this suit was brought [by

the father].

"On the trial in the court below, after the preceding facts were in substance proved, the jury were instructed by that court, that the plaintiff had no cause of action; but that the right of suit was exclusively in the son, George H. Tutt. Whether or not the court was correct in so instructing the jury, is the only question presented for decision of this court.

"That in moral justice, the plaintiff is entitled to the price agreed to be paid by Brown for the transportation of the bagging, is a proposition that none, it is presumed, will pretend to controvert. The service, though performed by George H. Tutt, the son, was not for his own benefit, but for the benefit of the plaintiff, and in justice the plaintiff is most indisputably entitled to the amount which was agreed to be paid by Brown. Being, therefore, entitled to the price, it would seem to follow as a neces