Is made by the seller, either by words or conduct, the seller

cannot afterwards throw off the nuisk and sue the princi-

pal." In a later English case ^ a distinction was drawn

between the case where the existence of a principal is

wholly undisclosed, and the agent contracts as principal,

and the case where the existence of a principal is disclosed,

but the principal is unnamed and unknown ; the doctrine of

Thomson v. Davenport being held applicable to the first

state of facts, and the doctrine of Ileald v. Kenivorthy to

the second. But in Irvine v. Watsoii^^ this distinction is

said to be "difficult to understand," and the doctrine of

Heald V. Kenivorthy is expressly approved. The contro-

Versy therefore is as to whether settlement in good faith

by the principal with the agent will discharge the {)rincii)al,

or whether the settlement must have been in reliance upon

such conduct on the i)art of the third person as will work

an estoppel against the latter.

(2) English doctrine. The English doctrine now is that

the principal is discharged from liability to the third person

only where the third person has by his conduct led the prin-

cipal to believe that there has been a scttlenifnt l)etween the

third person and the agent, or that, with knowledge of the

principal's liability, the third person elects to give credit

exclusively to the agcnt.-^ In other words the principal

must show that the third person is by positive conduct

estopped to claim recourse against the principal.

(3) American doctrine. The doctrine in the United

States seems to have followed the dictum in Thomson v.

1 Armstrong v. Stokes, L. 11. 7 Q. B. 598.

2 L. R. 5 Q. R. Div. 414.

3 Irvine r. Watson, supm ; Davison r. Donaldson, L. R. 9 Q. B. Div.

623 ; Pollock ou Cont. (Gtli ed.) 99.

CONTRACT FOR UNDISCLOSED PRINCIPAL. 169

Davenport. The principal is said to be discharged where

he has in good faith paid the agent or made such a change

in the state of the account between the agent and himself

that he would suffer loss if he should be compelled to pay

the seller.^ In other words mere delay on the jiart of the

third person may prejudice the principal and work an

estoppel without other and positive conduct.

§ 126. Second exception. — Election to hold agent.

Where the third party, after discovering the principal,

unequivocally elects to regard the agent as the sole respon-

sible contracting party, he cannot afterwards proceed against

the principal.^ What constitutes a final or unequivocal elec-

tion is a question of fact, though the conduct may be so

decisive as to establish an election in point of law, or so

indecisive as to render unwarranted a finding that there

was an election. Bringing an action against the agent has

an evidential force, but does not necessarily constitute an

election.^ It is generally held that an unsatisfied judgment

is not conclusive proof of an election;* though the ruling

is otherwise in England and some of our States.^ Proving

a claim in bankruptcy is not conclusive.В® Nor taking the

agent's promissory note."

It has been held that where at the time the contract is

made the third party knows the principal, but accepts a

1 Fradley v. Hyland, 37 Fed. Rep. 49; Thomas v. Atkinson, 38 Ind.

248; Laing v. Butler, 37 Hun (N. Y.), 144; Knapp v. Simon, 96 N. Y.

284; Story on Agency, В§ 449 ; 23 Am. Law Rev. 565.

2 Addison c. Gandasequi, 4 Taunt. 574; Paterson v. Gandasequi, 15

East, 62; Kingsley v. Davis, 104 Mass. 178; Kendall r. Hamilton, L. R.

4 App. Cas. 504.

3 Cobb V. Knapp, 71 N. Y. 348 ; Steele Smith Grocery Co. v. Potthast,

109 Iowa, 413; Curtis v. Williamson, L. R. 10 Q. B. 57.

4 Beymer v. Bonsall, 79 Pa. St. 298; Maple r. R. Co., 40 Oh. St. 313 ;

Brown v. Reiraan, 48 N.Y. App. Div. 295.

5 Pollock on Cont. (6th ed.) 100, citing Priestley v. Feruie, 3 11. & C.

977; King.sley v. Davis, supra.

6 Curtis ;-. Williamson, L. R. 10 Q. B. 57.

T Merrill v. Kenyon, 48 Conn. 314 ; Pentz v. Stanton, 10 Wend. (N. Y.)

271 ; Harper v. Tiffin N. B., 54 Oh. St. 425.

170 ntlNCIPAL AND TIIIUIi PARTY.

written instnmu'iit in the name of the agent, he makes

an election to h)ok to the agent alone, and parol evi-

dence is inadmissible to charge the jjrincipal.^ iJut this is

doubtful.^

It is held in England that a foreign princi|)al cannot sue or

be sued on a contract made by his agent in EnglanJ unless it

clearly appears that the agent was authorized to make iiis

principal a party and that the principal, and not the agent,

was intended to be the contracting party.-"^ It is j)resumcd

that the third party gives credit exclusively to the agent

in such a case. In the United States it is held ihat there

is no such presumption, and the question whether exclusive

credit is given to the agent is one of fact.*

§ 127. Third exception. — Contract under seal.

Where the contract between the agent and third party

is under seal (the seal not being merely superfluous), the

principal is not liable. It is a strict rule of the common

law that only the parties named or described in a sealed

instrument can sue or be sued upon it.^ This rule involves

the question as to the form in which an agent should exe-

cute a sealed instriunent in order to bind his principal.

Where one partner (A. B.) under a power of attorney from

the other (C. D.) executed a scaled instrument, " A. B."

" For C. D., A. B." it was held that C. D. was bound.^ But

where the trustees of a church executed a sealed instru-

ment, " A. B., C. D., and E. F., trustees of the Baptist Ciiurch

of R," it was held that the church was not bound." The

1 Chandler v. Coe, 54 N. II. 5G1.

2 Byington v. Simpson, 134 Mass. 1G9 ; Merrill r. Kenyoii, 48 Conn.

.314 ; Calder v. Dobell, L. 11. 6 C. P. 480.

3 Die Ell)inj;В«n- Actien-GeselLschaft v. Claye, L. 11. 8 Q. B. 313; Ilut-

ton V. Bulloch, L. II. Q. H. 572.

4 Kirkpatrick v. Stainer, 22 Wend. (N. Y.) 244; Kaiilbiuk v. Church-

ill, 59 N. II. 296; poxt, В§ 187..

5 Post, В§ 188; Briggs v. Partridge, 64 N. Y. 357; Borcherling r. Katz,

37 N. J. Eq. 150; lie Pickering's Claim, L. R. 6 Ch. App. 525.

8 Wilks V. Back, 2 East, 142; Mnssey v. Scott, 7 Cush. (Mass.) 215;

McDaniels r. Flower Brook Mfg. Co., 22 Vt. 274.

' Taft V. Brewster, 9 Johns. (N. Y.) 334.

^

CONTllACT FOR UNDISCLOSED PRINCIPAL. 171

recitals of the instrument, and particularly of the attesta-

tion clause, and the manner of the signing, must determine

whether the instrument is the obligation of the principal

or of the agent.^ Where an instrument is executed iu

behalf of the government, and the fact clearly appears by

the recitals, but the agent atlixes his own name and seal,

the government is bound and not the agent.'-^ But the

agent of a private principal must execute the instrument

in the name of, or on behalf of, his principal in order to

bind the latter.^ The rule applies equally to a principal

who is disclosed in the negotiations but whose name and

seal are not effectively affixed to the instrument.

In those states in which the statutes have made a seal

unnecessary to the validity of a deed, the courts nevertheless

treat the deed as a sealed instrument so far as concerns the

rule that an undisclosed principal can neither sue nor be

sued upon it.*

§ 128. Fourth exception. — Negotiable instrument.

Only the party whose name appears as the obligor on a

negotiable instrument can be sued upon it. Parol evidence

is therefore inadmissible to charge an undisclosed or unnamed

principal upon such an instrument.^ But if there be an am-

biguity on the face of the paper as to whether the principal

or agent is intended to be bound, parol evidence is admissible

to remove the ambiguity.**

1 Stinchfield v. Little, 1 Me. 231 ; Elwell v. Shaw, 16 Mass. 42 ; North-

western DistilUng Co. r. Brant, G9 111. 6.jS; Philadelphia, &c. K. v. How-

ard, 13 How. (U. S.) 307; Bradstreet v. Baker, U R. I. 546.

- Hodgson V. Dexter, 1 Cranch (U. S.), 345 ; Dawes v. Jackson,

9 Mass.- 490; Sheffield v. Watson, 3 Caines (N. Y.), 69; post, В§ 203.

3 The English Conveyancing Act (44 & 45 Vict. c. 41) provides (В§ 46)

that a deed executed in the name of the donee of a power of attorney, by

the authority of the donor of the power, shall be as effectual as if exe-

cuted in the name of the donor.

* Sanger v. Warren, 91 Tex. 472.

5 Bradlee v. Boston Glass Manufactory, 16 Pick. (^Mass.) 347; Sparks

V. Dispatch Transfer Co., 101 Mo. 531 ; Ducarrey v. Gill, M. & M. 450.

6 Reeve r. First N. B., 54 N. J. L. 208; Beau v. Pioneer Mining Co.,

66 Cal. 451.

172 PRINCIPAL AND THIRD PARTY.

Whether the signature is that of the principal or that of

the agent must be determined by considering the recitals of

the instrument, the marginal headings, and the form of the

signature itself. The construction of signatures to negoti-

able instruments is fully discussed in a subsequent cha{)ter.^

It seems, however, that the third party may disregard the

negotiable instrument and proceed against the undisclosed

principal uj)un the common counts or original consideration.''^

o. liiylits of an Undisclosed Principal.

В§ 129. General rule.

Subject to the exceptions and qualifications hereafter enu-

merated, an undisclosed princii)al may bring an action in

his own name upon contracts made by his agent in his behalf,

although the third party supposed that he was dealing with the

agent as principal.^ This rule is said to be the necessary cor-

ollary of the one which gives the third persona right of action

against the undisclosed principal, since mutuality of remedial

rights is clearly just. It follows that two undisclosed princi-

pals may contract through their respective agents, and that the

contract will give to each (subject to the enumerated exceptions)

the same rights and liabilities as if they had been disclosed

principals or had contracted in person.^ The rule is appli-

cable to del credere agencies as well as to ordinary agencies.^

This right of the principal is superior to the right of the

agent, and when the principal has once given notice of his

intention to exercise it, the third party will settle with the

agent at his peril.^ If the contract be in writing (not under

seal or negotiable), it does not violate the rule against vary-

1 Post, §§ 180-195.

2 Pentz V. Stanton. 10 Wend. (X. Y.) 271; Harper v. Tifiin X. 15., .")4

Oh. St. 425.

8 Norfolk V. Wortliy, 1 Camp. 337; Sadler v. Leigh, 4 Camp. 195;

Spurr V. Cass, L. R. 5 il. B. C5G; Huntington v. Knox, 7 Cusli. (Mass.)

371; Taintor r. Prendergast, 3 Hill (X. y.),72; Talcott r. Wabash 11.,

150 N. Y. 461 ; Barhani v. Bi-ll, 112 X. C. 131.

* Darrow v. Home Produce Co., 57 Fed. Rep. 463.

5 Hornby v. Lacy, 6 M. & S. 166.

*^ Pitts V. Mower, 18 Me. 361 ; Huntington v. Knox, supra; post, В§ 208.

CONTRACT FOR UNDISCLOSED PRINCIPAL. 173

ing- the terms of written instruments by parol to admit parol

evidence for tlie purpose of showing tlie real principal.^ But

it would vary the instrument to admit parol evidence to

discharge the agent.^

§ 130. First exception. — State of accounts.

The right of the undisclosed i)rincipal to sue the third

party is subject to the equities and the state of the accounts

existing l)etwcen the agent and the third party at the time

the right is asserted. In other words the principal cannot

assert his rights without leaving to the third party exactly the

same rights as if the agent had been in fact the principal.^

The cases applying this doctrine have been mainly those

where the agent sold goods in his own name, and under these

circumstances the distinction is made between the case where

the agent has possession of the goods, and where he has not.