with full knowledge of the facts, adopts the contract as ་ p68. Nota 2 P 4. Note E Undisclosed Principal.-When an agent makes a contract without naming his principal, and the other party knows he is dealing with an agent, but does not know who the principal is, the agent himself is personally liable 53,54. on the contract; but the principal is also liable, and may on being discovered be sued for breach of the contract. In this case, however, it may be shown by the form of the contract that it was not intended that the agent should be personally liable. Where a person contracts with another whom he does not know to be an agent, but who is in fact an agent, the undisclosed principal is bound by his agent's contract, and is also entitled to enforce it. But when the party contracting discovers that he has contracted with an agent and discovers who the principal is, he has an option, and may treat either the agent or the principal as the party bound to him. He must, however, exercise this option within a reasonable time after discovering the undisclosed principal, or he will be bound to treat the agent with whom he contracted as the principal. Having once made his choice and elected to sue either the principal or the agent, the party is bound by such choice, and cannot afterwards sue the other. For example, Humble, being the owner and manager of a public-house, sold his business to Fenwick, a brewer, and Fenwick appointed Humble manager of the business. Humble's name remained on the door, and the licence was taken out in Humble's name. Humble bought on credit from Watteau a quantity of cigars for sale at the bar of the house. It was contrary to Humble's agreement of employment with Fenwick for him to buy cigars on credit. Watteau had never heard of Fenwick, and believed Humble to be carrying on business on his own account. Watteau, failing to get his money from Humble, and having made inquiries and found that the business belonged to Fenwick, sued Fenwick for the price of the cigars. It was decided that the cigars were such as would usually be supplied to the customers of such an establishment, and that it was within the scope of the usual authority of a person in Humble's position to order such goods for the supply of his customers. In these circumstances, the High Court held that Fenwick, the undisclosed principal, was liable for the price of the cigars, even though his agent had acted in contravention of his instructions in contracting to buy them.1 Where a person contracts as agent without naming a principal, and he has in fact got no principal, he is himself liable fully on the contract, and in the absence of fraud may sue upon it. Where a person knows that another with whom he is negotiating is an agent, and knows who his principal is, but chooses, with the assent of the agent, to give credit to the agent, he cannot afterwards treat the principal as his debtor. Thus, Gandesequi, a Spaniard, authorized Larrazabal, an agent in London, to buy goods for him. Larrazabal asked Paterson to supply the goods, and Paterson did in fact, knowing all the facts, send the goods 1 Watteau v. Fenwick (1893), 1 Q. B. 346. * Gaudesequi ૐ was hable to the creditors of Larrazabal, not to Paterson who was only one of 51 to Gandesequi to Spain. Paterson, however, with his consent, debited Larrazabal, and not Gandesequi, in his books with the price of the goods. Soon afterwards Larrazabal became bankrupt, and Paterson sued Gandesequi. It was held that Paterson, having made his choice, must abide by it, and could not succeed against the principal, to whom he had not given credit. And generally by mercantile usage, where an agent buys or sells goods in the United Kingdom for a principal abroad it is presumed that the agent acts as principal, and cannot pledge his principal's credit or avoid personal liability without express authority so to do and the assent of the other party to the contract. Fraud of Agent.-Where an agent acting within the scope of his authority is guilty of fraud committed in the supposed interest of his principal, the fraud of the agent is the fraud of the principal; and the principal is under the same liability for his agent's fraud as if he had committed the fraud himself, even if he knew nothing of it nor in any way authorized or approved of it. To make the principal liable, however, the false representation made by the agent must have been of such a kind as it was within the scope of the agent's authority to make. But if the agent commit a fraud in the course of his principal's business, not to further that business but entirely for the agent's own purpose, the principal is not liable. In all cases of fraud by an agent, whether the principal is liable for his agent's fraud or not, the agent himself is liable for his own fraud. Delegation of Authority.-An agent cannot in general carry out his duties through a sub-agent, or appoint any other person to act for him, so as to make the principal liable on contracts made by such sub-agent. Confidence 1 Paterson v. Gandesequi, 15 East 62. Employ an agent that man § of a man is bound by the ayent's acts: if the agent be fundulent, the employer (not the 3 party) must suffer. in the particular person employed is at the root of the relationship between principal and agent; and it is clear that a man may have perfect confidence in the discretion of A to transact his affairs, but may not have the same confidence in A's discretion to select another person to transact them. But the agent may appoint a sub-agent if he have the principal's authority so to do; and this authority may either be express or implied from the conduct of the principal, the usage of a particular business or the nature of the business. Also, where in the course of business unforeseen emergencies arise which impose upon the agent the necessity of employing a substitute in order to save the principal's interests from injury, the agent has implied authority to appoint a substitute, and the principal is bound by the acts of such substitute. Rights inter se. As to the rights of principal and agent inter se, these are of course regulated by the agreement between them; but it is implied that the principal must indemnify the agent against all costs, charges, and expenses which the agent has properly incurred in transacting his principal's business. Again, as the relationship between them is one of great confidence, the agent must make no profit for himself out of his principal's business without the full knowledge and assent of the principal. And if the agent has any personal interest in any business which it is his duty to transact for his principal, he must make full disclosure of such interest to his principal. Hence, where an agent is employed to buy goods, he cannot without the principal's consent buy his own goods; and if he be employed to sell goods, the agent cannot without the principal's consent buy them himself. In either case the agent's duty to his principal would be opposed to his own self-interest. If an agent make any secret profit out of his agency, the principal has a right to recover such profit from him; for he must account to his principal for every penny he receives. So that secret commission paid to the agent by the other party to a contract may be recovered by the principal. But a principal has a right to repudiate a contract entirely when his agent has been induced to make the contract by a bribe, and has a right of action for fraud against both the giver and the acceptor of the bribe. By a recent Act of Parliament, moreover,1 it is a criminal offence, punishable by imprisonment up to two years and by fine up to £500, for an agent to corruptly accept or for any person to corruptly give to an agent, any gift or consideration given to induce the agent to do or forbear from doing any act in relation to his principal's business. Mercantile Agents.-A "mercantile agent" is one who in the ordinary course of his business as agent has authority as such agent to sell or buy goods or to consign goods for the purpose of sale, or to raise money on the security of goods. Clearly mercantile agents are general agents. Factors are an important class of mercantile agents. A "factor is an agent to whom goods are entrusted for the purpose of being sold on behalf of the owner. He is usually paid by his principal by way of commission upon the price he receives for the goods he sells, and is often called a "commission agent." A factor as a rule sells in his own name, and often sells goods of which he is himself the owner. Hence, a buyer from a factor does not usually know who is the owner of the goods he buys. The contract is subject to all the rules above stated as to the liability of an undisclosed principal; and therefore if 1 The Prevention of Corruption Act, 1906. p.54. seep 102. h.35. see pp 49, 54. a A buyer from |