In Watteau v. Fenwick,  1 Q.B. 346, the plaintiff made a contract
the manager of a pub for the supply of goods. The plaintiff was not
and sued the defendant, the owner of the pub. The manager had been the
owner of the pub, but he had sold it to the defendant, remaining on as
manager. The licence was taken out in the manager's name and his name
appeared as the licensee. The manager was instructed not to purchase
certain supplies for the pub from outside parties. In breach of these
instructions, the manager purchased supplies from the plaintiff. The
Divisional Court, on appeal from the County Court, held that what the
manager did was within the usual authority of a person managing a pub
that the acts of the manager within the scope of this authority bound
principal, even though the third party neither knew of the agency nor
on anything done by the principal.
The only justification that the court gave was that if the defendant
not made liable, then
in every case of undisclosed principal, or at least in every case where
fact of there being a principal was undisclosed, the secret limitation
authority would prevail and defeat the action of the person dealing
agent and then discovering that he was an agent and had a principal.
1 Q.B. 346 at 349)
The court made reference to the law of limited partnerships, pointing
that actions taken by the general partner within the scope of his usual
authority would bind a limited partner. The court then claimed that
law of partnership was but a branch of the general law.
An alternative view was taken in McLaughlin v. Gentles (1920), 46 O.L.R.
477, 51 D.L.R. 383 (App. Div.). The defendants were the members of a
syndicate that had sent out one of their number, a man called Chisholm,
prospect. The plaintiff supplied goods to Chisholm and, when Chisholm
refused to pay, sued the other members of the syndicate to recover the
of the goods. The Appellate Division held that the defendants (other
Chisholm) were not liable as they had not held Chisholm out as their
or as having authority to buy the goods. The court referred to Watteau
Fenwick and other cases, but declined to follow the Divisional Court.
Appellate Division said:
It seems to be straining the doctrine of ostensible agency or of holding
out, to apply it to a case where the fact of the agency and the holding
were unknown to the person dealing with the so-called agent at the
to permit that person, when he discovered that his purchaser was only an
agent, to recover against the principal, on the theory that he is
from denying that he authorized the purchase. It appears to me that the
fact that there was a limitation of authority is [at] least as
the fact that the purchaser was an agent. The vendor did not know
these facts, and so did not draw any conclusion involving the principal
he sold and delivered the goods. Should he be permitted, when he
look to the principal, to do so upon any other terms than in accordance
the actual authority given at that time? It is entirely different where
there is a holding out as agent and the fact of the agency is known, but
where neither is an element in the bargain nor the reason why the
given, and so not an additional security known to the vendor at the
equity should be raised in favour of the vendor as against the
as to make the latter liable.
((1920), 46 O.L.R. 477, 490, 51 D.L.R. 383, 394-95, per Hodgins J.A.)
The comparison between Watteau v. Fenwick and McLaughlin v. Gentles
presents the issue. The first case establishes a kind of "enterprise"
liability, making the owner, the undisclosed principal, liable for any
contracts made with the plaintiff. The second sees no reason to spread
loss among the partners or to do anything other than to say that the
plaintiff must, in the future, make sure that anyone he deals with has
assets sufficient to complete the purchase.
Sent: February-02-15 9:31 AM
To: Harrington Matthew P.
Subject: Re: Vicarious Liability of Undisclosed Principle?
On 2/2/15, Harrington Matthew P.
Here is a relatively recent Ontario AC case discussing the general
John Ziner Lumber Ltd. v. Kotov, 2000 CanLII 16894 (ON CA)
An early American Supreme Court case is
Ford v. Williams, 62 U.S. 287 (U.S. 1858)
An old, but pretty good law journal article is
Arnold Rochvarg, Ratification and Undisclosed Principals, 1989 McGill
Matthew P. Harrington
Faculté de droit
Université de Montréal
3101 chemin de la Tour
Montréal, Québec H3T 1J7
Sent: Monday, February 02, 2015 8:06 AM
I'd be really grateful for any authorities on the question whether a
principle is vicariously liable for acts of their agent in the course
of or incidental to the agent's agency, in circumstances where the
principle is undisclosed to third parties.
Where, in other words, T (the third party) deals with A (the agent)
not realizing that A acts for P (the principle).