In Watteau v. Fenwick, [1893] 1 Q.B. 346, the plaintiff made a contract with the manager of a pub for the supply of goods.  The plaintiff was not paid 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 alone 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 and that the acts of the manager within the scope of this authority bound the principal, even though the third party neither knew of the agency nor relied on anything done by the principal.

 

The only justification that the court gave was that if the defendant were not made liable, then

 

in every case of undisclosed principal, or at least in every case where the fact of there being a principal was undisclosed, the secret limitation of authority would prevail and defeat the action of the person dealing with the agent and then discovering that he was an agent and had a principal. ([1893] 1 Q.B. 346 at 349)

 

The court made reference to the law of limited partnerships, pointing out that actions taken by the general partner within the scope of his usual authority would bind a limited partner.   The court then claimed that the 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 mining syndicate that had sent out one of their number, a man called Chisholm, to prospect.  The plaintiff supplied goods to Chisholm and, when Chisholm refused to pay, sued the other members of the syndicate to recover the price of the goods.  The Appellate Division held that the defendants (other than Chisholm) were not liable as they had not held Chisholm out as their agent or as having authority to buy the goods.  The court referred to Watteau v. Fenwick and other cases, but declined to follow the Divisional Court.  The 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 out were unknown to the person dealing with the so-called agent at the time, and 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 estopped 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 important as the fact that the purchaser was an agent.  The vendor did not know either of these facts, and so did not draw any conclusion involving the principal when he sold and delivered the goods.  Should he be permitted, when he elects to look to the principal, to do so upon any other terms than in accordance with 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 credit was given, and so not an additional security known to the vendor at the time, no equity should be raised in favour of the vendor as against the principal so 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 neatly 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 the 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.

 

Angela Swan

 

 

-----Original Message-----
From: Gerard Sadlier [mailto:gerard.sadlier@gmail.com]
Sent: February-02-15 9:31 AM
To: Harrington Matthew P.
Cc: obligations@uwo.ca
Subject: Re: Vicarious Liability of Undisclosed Principle?

 

Mat

 

Much appreciated!

 

Thanks

 

Ger

 

On 2/2/15, Harrington Matthew P. <matthew.p.harrington@umontreal.ca> wrote:

> Ger

> 

> Here is a relatively recent Ontario AC case discussing the general rule.

> 

> John Ziner Lumber Ltd. v. Kotov, 2000 CanLII 16894 (ON CA)

> http://www.canlii.org/en/on/onca/doc/2000/2000canlii16894/2000canlii16894.html

> 

> 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 L.J.

> 

> http://lawjournal.mcgill.ca/userfiles/other/4930762-Rochvarg.pdf

> 

> ---------------------------------------

> Matthew P. Harrington

> Professeur titulaire

> 

> Faculté de droit

> Université de Montréal

> 3101 chemin de la Tour

> Montréal, Québec H3T 1J7

> 514.343.6105

> www.droit.umontreal.ca

> ---------------------------------------

> 

> 

> From: Gerard Sadlier<mailto:gerard.sadlier@gmail.com>

> Sent: Monday, February 02, 2015 8:06 AM

> To: obligations@uwo.ca<mailto:obligations@uwo.ca>

> 

> Dear all,

> 

> 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).

> 

> Many thanks

> 

> Ger

>