Answer the following: a. What is an undisclosed principal? b. What is a unidentified (partially disclosed) principal? c. What liability does an agent have to a third party when the principal is either undisclosed or unidentified (partially disclosed)?

Question

d. Stan is asked to be an agent for Roscoe, but Roscoe does not wish third parties to know that Stan represents him. In light of your answer to part (c), why would Stan want to be an agent for Roscoe? Why would Roscoe wish that third parties not know his identity? Explain.

Answer 1

a. An undisclosed principal is not known to the third party. The third party believes he or she is dealing personally and solely with the agent.
b. A unidentified (partially disclosed) principal exists where, at the time of a transaction, the third party knows an agency relationship exists, but doesn't know who the principal is.
c. Unless otherwise agreed, an agent making a contract for a unidentified (partially disclosed) principal is a party to the contract. If the principal is undisclosed, the agent is liable as a party on the contract.
d. Assuming Roscoe has adequate finances, it makes little difference to Stan whether his principal is disclosed or undisclosed, because as long as Stan acts within his scope of authority, Roscoe is bound to perform on the contract. However, if Roscoe is financially shaky and cannot honor his commitments, Stan must be aware he has personal liability on all contracts in which Roscoe was an undisclosed principal, in which case the contracting party may look to Stan for payment on the contracts. Stan is entitled to indemnity from Roscoe, but Roscoe may file bankruptcy. Roscoe may wish to remain undisclosed in order to effect a transaction that is more beneficial to him.