MBE Rules · Business Associations
Undisclosed and Partially Disclosed Principals
Undisclosed principal
The rule
An agent for an undisclosed or unidentified principal is personally liable on the contract; the third party may elect to hold either the agent or the principal once disclosed, and the principal may enforce except where identity was material.
In plain English
When an agent acts on behalf of a principal who is not disclosed or is only partially disclosed, the agent can be held personally liable for any contracts made. Once the principal's identity is revealed, the third party can choose to pursue either the agent or the principal for enforcement, unless the principal's identity was a key factor in the agreement.
Worked example
An agent enters into a contract to purchase goods on behalf of a principal whose identity is not revealed to the seller. After the contract is signed, the principal's identity is disclosed. The seller can choose to enforce the contract against either the agent or the principal, unless the seller specifically relied on knowing who the principal was.
Memory hook
Undisclosed agents are in the hot seat—liable until the principal is revealed!
The trap
Exams may present scenarios where the agent's liability seems ambiguous, leading students to overlook the implications of disclosure status. Watch for clues about whether the principal's identity was material to the contract.
How examiners test it
Questions often test the nuances of liability and enforcement rights between agents and principals, particularly focusing on the implications of disclosure status in various fact patterns.
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