In agency law, an undisclosed principal is a person who uses an agent for negotiations with a third party who has no knowledge of the identity of the agent's principal. Often in such situations, the agent pretends to be acting for themselves. As a result, the third party does not know to look to the real principal in a dispute.[1]
Under United States law according to the Restatement (Third) of Agency § 2.06, an undisclosed principal may still be held liable to a third party who justifiably is induced to make a detrimental change in position, even if the agent lacked actual authority to act on behalf of the principal, so long as the undisclosed principal had notice of agent's conduct and that it might induce the third party to change its position, and the principal did not take reasonable steps to notify the third party of the facts. Even where an undisclosed principal has previously forbidden the agent to take some action or incur some debt, the undisclosed principal may be liable for the action or debt so long as the third party would reasonably believe the agent would have had the authority to take the action or incur the debt under the same circumstances had the principal been disclosed, i.e. so long as the transaction is in the usual course of business engaged in by the agent.
^Hill, Gerald N.; Hill, Kathleen (2002). The people's law dictionary : taking the mystery out of legal language. New York, NY: MJF Books. ISBN 9781567315530.
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