This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In many of the cases some emphasis is laid on the fact that the principal was not disclosed when the agent entered into the contract with the adversary party. The importance of this fact is the same in written and unwritten contracts and may be briefly stated as follows:
Lakes Towing Co. v. Mills Transportation Co., 155 Fed. 11, 83 C. C. A. 607, 22 L. R. A. (N.S.) 769; Walker v. Ha-fer, 170 Fed. 37, 96 C. C. A. 311, 24 L R. A. (N.S.) 315.
Connecticut. Merrill v. Kenyon, 48 Conn. 314, 40 Am. Rep. 174.
Illinois. Daugherty v. Heckard, 189 111. 239, 59 N. E. 569 [affirming, 89 111. App. 544].
Massachusetts. Byington v. Simp-son. 134 Mass. 169, 45 Am. Rep. 314.
Minnesota. Davidson v. Hurty, 116 Minn. 280, 39 L. R. A. (N.S.) 324, 133 N. W. 862.
Missouri. Jones v. Williams, 139 Mo. 1, 61 Am. St. Rep. 436, 37 L. R. A. 682, 39 S. W. 486, 40 S. W. 353.
New York. Kayton v. Barnett, 110 N. Y. 625, 23 N. E. 24.
North Dakota. Patrick v. Mercantile Co., 13 N. D. 12, 99 N. W. 55.
Ohio. Aetna Ins. Co. v. Church, 21 O. S. 492.
Oregon. Barbre v. Goodnle. 28 O. 465, 38 Pac. 67, 43 Pac. 378; Anderson v. Flouring Mills, 37 Or. 483, 82 Am. St. Rep. 771, 50 L. R. A. 235, 60 Pac. 839; Riddle State Bank v. Link, 78 Or. 498, 153 Pac. 1192; Smith v. Campbell. 85 Or. 420, 166 Pac. 546; Alvord v. Banfield, 85 Or. 49, 166 Pac. 549.
Pennsylvania. Hubbard v. Tenbrook, 124 Pa. St. 29, 10 Am. St. Rep. 585. 2 L. R. A. 823, 16 Atl. 817.
Washington Landers v. Foster, 34 Wash 674, 76 Pac. 274.
3 Great Lakes Towing Co. v. Mills Transportation Co., 155 Fed. 11, 83 C. C. A. 607, 22 L. R. A. (N.S.) 769.
4 Riddle State Bank v. Link, 78 Or. 498, 153 Pac. 1192.
5 Hanson v. Heard, 69 N. H. 190, 38 Atl. 788 [citing, Van Leuven v. First Nat. Bank, 54 N. Y. 671; Pierson v. Atlantic Nat. Bank, 77 N. Y. 304].
6 Anderson v. Flouring Mills Co.. 37 Or. 483, 82 Am. St. Rep. 771, 50 L. R. A. 235, 60 Pac. 839.
7 Stockton, etc.. Society v. Giddings, 96 Cal. 84, 31 Am. St. Rep. 181, 21 L. R. A. 406, 30 Pac. 1016.
If the parties agree orally that the agent is acting on behalf of his principal, there is no question then in oral contracts as to the right of the adversary party to enforce the contract against the principal.1 In written contracts not required to be in writing or to be proved in writing, the only question raised by attempting to enforce the contract against the real principal is that of the effect of the parol evidence rule. But if identity and existence of the principal are alike undisclosed, the additional question has been raised, whether the adversary party can properly be said to have contractual relations with this unknown principal. As this is the most extreme case, most stress has been laid upon it. The courts have held that whether the contract is oral or written, as long as it is not of the class of contracts which must be in writing, the real principal may be shown and held liable on the contract.2 Some courts, however, have misunderstood the reason for emphasizing the fact that the principal is unknown, and have said that the rule allowing the real principal to be held on a written contract by which he is not in terms made liable, is limited to cases where the real principal is unknown to the adversary party at the time of making the contract; and that if the real principal is known, and the adversary party accepts a written contract which by terms and legal effect binds the agent, this is an election to hold the agent and not the principal.3 An examination of the authorities cited in Chandler v. Coe,4 will show that those sustaining the proposition are cases of negotiable instruments - that is, of contracts which must be in writing. A number of the cases which are cited in other authorities in support of this proposition are of the same type.5
1 See Sec. 1759.
2 England. Trueman v. Loder, 11 A. & E. 589.
United States. Ford v. Williams, 62 U. S. (21 How.) 287, 16 L. ed. 36.
Georgia. Merchants' Bank v. Bank, 1 Ga. 418, 44 Am. Dec. 665.
Massachusetts. Williams v. Robbing 82 Mass. (16 Gray) 77, 77 Am. Dec. 396.
New Jersey. Borcherling v. Katz, 37 N. J. Eq. 150.
New York. Brady v. Nally, 151 N. Y. 258, 45 N. E. 547.
Virginia. Waddill v. Sebree, 88 Va.
1012, 29 Am. St. Rep. 766, 14 S. E. 849.
Washington. Brewster v. Baxter, 2 Wash. Terr. 135, 3 Pac. 844. The general question of the liability of principal or agent to third parties on contracts in which the principal is not disclosed is considered elsewhere. See Sec. 1775 et seq.
3 Chandler v. Coe, 54 N. H. 561 [obiter to the same effect in Heffron v. Pollard, 73 Tex. 96, 15 Am. St. Rep. 764, 11 S. W. 165].
4 54 N. H. 561.
5Merrell v. Witherby, 120 Ala. 418, 74 Am. St. Rep. 39, 23 So. 994, 26 So.
In cases involving contracts not required to be in writing, many fail to indicate whether the principal was known or unknown to the adversary party when the contract was entered into, and by fair inference, treat such fact as immaterial. Where the courts have discussed the effect of the adversary party's knowing who the real principal is when he accepts a contract signed by the agent alone, the weight of authority is that he can hold the real principal if the agreement between the adversary party and the agent does not provide for giving exclusive credit to the agent.6 If, as has been suggested, "an undisclosed principal * * * is one not disclosed in the contract,"7 the conflict between the two theories disappears.
If with knowledge of the facts the adversary party elects in advance to give credit to the agent exclusively, he can not hold the principal.8
974; Andrews Co. v. National Bank, 129 Ga. 53, 121 Am. St. Rep. 186, 12 Am. & Eng. Ann. Cas. 616, 58 S. E. 633.
6Higgins v. Senior, 8 M. & W. 834; Colder v. Dobell, L. R. 6 C. P. 486; Bateman v. Phillips, 15 East. 272; York County Bank v. Stein, 24 Md. 447; Byington v. Simpson, 134 Mass. 169, 45 Am. Rep. 314; Dexter-Horton National Bank v. Seattle Homeseekers' Co., 82 Wash. 480, 144 Pac. 691.
7Unruh v. Roemer, 135 Minn. 127, 160 N. W. 251.
8 Silver v. Jordan, 136 Mass. 319.