a) Introduction - What is Agency

The relationship between two parties known as a principal and agent is

referred to as agent. Accordingly, the role of the agent is to draft contracts
between the principal and third parties as well as to carry out other duties
on behalf of the principal. Besides, an agent is a person who has been given
permission to act on behalf of the principal and represent him in interactions
with other people. This type of relationship is known as agency. In other
words, an agent represents his principal in negotiations with third parties. He
establishes an agreement with third parties and is accountable to the
principal for his actions. Nonetheless, the principal bears certain
responsibilities to third parties regarding the actions of the agent. However,
when an agent enters into a contract, the circumstances surrounding the
contract will determine its implications. Therefore, the agency may enter into
a contract with the following two different kinds of situations such as
disclosed and undisclosed principal.

Differences between the disclosed and undisclosed principal

A disclosed principal is one in which a third party contract involves the
principal rather than the agent, and which the agent contracts specifically as
the agent of the principal for an identified or distinguished principal.
Therefore, the only party who may file a lawsuit on the contract is the
principal which can sue and be sued. In addition, Bowstead and Reynolds
state that even if the agent exceeds his authority throughout the contract-
making process, he shall still be held accountable to a third party for losses
resulting from the violation of the implied warranty of authority. However, an
agent has the explicit right to assume culpability in addition to or instead of
principal. Additionally, where an agent works on behalf of a principle within
the bounds of his power and a third party knew or should have known that
the agent was acting on behalf of the principal, as defined by Article 12 of
UNIDROIT1, the convention on agency in the international sales of goods.
Unless the facts of the case dictate otherwise, the agent’s actions will
immediately bind the principal and the third party to one another. For
instance, by mentioning a commission contract, whereby the agent commits to
binding himself only.
1 Article 12 of UNIDROIT (International Institute for the Unification of Private Law)
Nonetheless, there is a set of rules regarding written contracts which
clarifies that an agent who signs a contract in his own name is personally
accountable unless it is made apparent by the contract which he has agreed
to in his role as an agent. This can be seen in the case of The Swan [1968]2.
For instance, a lawyer is signing on behalf of the firm, therefore the firm will
be liable instead of the lawyer himself. This is because the agent in the
contract disclosed his relationship with the principal. Hence, only the principal
can be sued, which is the firm or sued the agent. As a general rule, the
insertion of descriptive words like “agent” or “director” after the signature
will not be enough to remove the agent’s liability. He must declare that he is
presenting himself in his capacity as a representative. According to Chitty on
Contracts, an agent will typically not be held accountable when they contract
as an agent without identifying the principal, who is truly in existence;
instead, liability will be imposed in cases where the agent is the principal.

Moreover, using the Court of Appeal’s earlier judgment in Universal Steam

Navigation Company Limited v James Mckelvie and Company [1923]3 as
support, the court in Electrosteel Castings Ltd v Scan Trans Shipping &
Chartering Sdn Bhd [2003]4. According to the statement, by including the
phrase “as agent” in their signature, they made it quite evident that they
were signing solely as agents for other people and did not intend to be
officially bound as principals. As stated by Bankers, Ll, it is in the best interest
of the business community for a signature to be understood as acting on
behalf of the entity. Plus, he totally agrees with the decision that a signature
including a clause like this should be interpreted as a purposeful declaration
of intent to relieve the signatory of any personal responsibility. Furthermore,
it was challenging for Teare J. to point out in the recent case, Filatona
Trading Ltd. v Navigator Equities Ltd. [2020]5, that a court must find very
explicit language before it may determine that a contract is limited to the
listed parties.

2 [1968] 1 Lloyd’s Rep. 5

3 [1923] AC 492
4 [2003] EWHC 1993 (Comm)
5 [2020] EWCA Civ 109
Undisclosed principal will be the opposite of disclosed principal. In other
words, the third party is not aware that the agent works for the principal.
However, if the third party knows, then the third party will sue the principal.
This has been stated in the case of Browning v Provincial Insurance Co of
Canada (1873)6. Likewise, if the third party is aware then they can sue the
principal, but if they are not aware that the agent is working for the
principal, then they only can sue the agent. That's the only avenue they can
have which is to sue or be sued against the agent or the other way round,
the agent sue the third party. For instance, in an undisclosed principal, the
principal is supposed to pay the agent, yet the principal mentioned that if the
agent did not send the goods on time, the principal will not pay the money to
the agent. However, the agent will try to sue the third party. Due to there
being an undisclosed principal, the agent cannot reveal the principal
relationship to the third party. This is to prevent the third party from suing
the principal. On the other hand, if the principal is revealed to the third party,
then the third party will straight away sue the principal. As in the case of
Browning v Provincial Insurance Co of Canada (1873)7, the agent enters into
a contract as an obvious principal, leaving the third party with no knowledge
about his role as an agent where the agent and the third party are
supposedly the parties to the contract. Despite this, the third party may
decide to sue the principal rather than the agent once he learns the truth.

Additionally, this is to protect the principal from being revealed to the third
party. In the case of Watteau v Fendwick [1893]8, the relationship was an
undisclosed relationship because the new hotel owner has no knowledge how
to run a hotel. For example, the person who runs a school is not someone that
is well versed with education. There is then no trust in the relationship,
therefore will not enter into the contract. Meanwhile there is a reason why
the third party enters into a contract with the agent not knowing that there
is a principal. This is due to the business model, which places trust in the
agent and system but not the principal. According to the case of Watteau v
Fendwick [1893]9, they trust the ex manager of the hotel, which they had
6 (1873) 5 L.R.P.C. 263 b.
7 Ibid (6)
8 P1893] 1 QB 346
9 Ibid (8)
been dealing with for so many years. For example, a company staff working in
the frim for many years, and he trusts the institution. But they won't believe
it if they found where there is actually someone else is running the company.
Important to the principal and agent
When a third party deals with a disclosed principal, the principal’s existence is
typically known to the third party. A disclosed principal bears direct
responsibility for an agent acting within the limits of their power, and the
agent’s personal culpability is generally limited. On the other hand, if it is an
undisclosed principal, the agent might be held personally accountable at first,
and the principal who has not given their identity will then be held
accountable. This distinction is essential in order to establish who is legally
liable for the agent’s conduct. In addition, contracts in disclosed principal
relationships are enforceable directly against the principal because the third
party is aware of their participation. In the case of an undisclosed principal,
the third party might initially enforce the contract against the agent.
Determining this relationship is essential to ascertain who is obligated by the
contract. However, if the name of the principal is disclosed, then the third
party can enforce the contract against the principal. Furthermore, a disclosed
principal relationship allows for greater transparency regarding risk and
liability. Knowing that the principal is involved allows the third party to make
well-informed decisions. If the principal is not disclosed, there could be
greater risks for the agent and a surprise for the third party when they find
out about the principal’s existence. To successfully manage these risks, it is
imperative to identify the concealed principal. Lastly, in disclosed principal,
the third party usually acknowledges that they are dealing with an agent
which is acting on behalf of a known principal while in undisclosed principal,
the third party might not be aware of the existence of principal.

Conclusion
In conclusion, comprehending all aspects of the principal-agent relationship in
business and legal contexts requires being able to distinguish between an
undisclosed and a disclosed principal. The primary distinctions are whether or
not the third person knows who the principal is. Transparency is provided by
a stated principle scenario, which limits the agent's own liability and permits
direct contract enforcement against the identified principal. In contrast, an
undisclosed principal circumstance entails the principal's initial confidentiality,
which could subject the agent to personal liability until the principal's identity
is exposed. Determining these differences is essential for determining legal
obligations, liabilities, and the enforceability of agreements between the
parties.

b) Introduction - What is Nemo Dat Quod Non Habet

According to Nemo Dat rules, the transferor of goods cannot pass a better
title that he possesses. The norm reflects the common law’s past support for
the protection of property rights. Besides, the S.21(1) Sales of Goods Act
(SOGA) 197910 now states the rule as: based on the act, goods are sold by
someone who is not their owner and who is not selling them with the owner’s
permission or authority. Unless the owner of the goods is prohibited from
denying the seller’s authorization to sell by his actions, then the buyer does
not obtain a better title to the items than the seller had. This rule can be
seen clearly in the case of Bishopsgate Motor Finance Corporation Ltd v
Transport Brakes Ltd [1949]11. Lord Denning LJ mentioned that no one could
give a better title than himself and the one who takes without permission and
in good faith needs to be given a respectable title.

Exception of Nemo Dat

As the general rule, Ally cannot claim the title of the goods since the main
supplier hasn't transferred the tools to Big Machinery & Co. However, there
are several exceptions in the Nemo Dat rule which are not applicable to all
transactions. The first exception is the agency. It is difficult to identify an
agent as a rogue if they truly possess their principal’s authority to sell the
item. In fact, Ally, as the sales representative of Big Machinery & Co, has the
authority to sell the tool to buyers. According to Wright J. in the
Montgomerie v United Kingdom Mutual Steamship Association [1891]12, case
where an agent enters into a contract on behalf of a principal, the principal,
not the agent, is the party to the contract; hence, under common law, the
principal is the only party capable of suing and being sued. Besides, when the

10 S.21 Sales of Goods Act (SOGA) 1979

11 [1949] 1 KB 322
12 [1891] 1 QB 370
third party purchases things from the agent based on the agent's purported
permission to sell them, the owner therefore is obligated and the third party
has a good title. As Ally a sales representative has the authority to sell the
tools and the potential buyer has already reliance regarding the tools they
have. This Nemo Dat principle exception is covered under S.21(1) SOGA 197913.
In Ally’s case, goods title can be claim under the exceptions of agency due to
the authority that the agent has in order to sell the tools to the buyer.
Meanwhile, the fact also satisfied the requirement that the potential buyer
had reliance on Ally’s sales which stated they have the tools.

The second exception will fall under estoppel. According to Section 21 SOGA
1979, the nemo dat quod non habet concept does not apply in situations
where the owner of the goods is prevented from disputing the seller's
authorization to sell by his actions. This appears to be a specific type of
estoppel provided by statute. Furthermore, the decision made in the case of
New Zealand Securities & Finance Ltd v Wrightcars Ltd [1925]14 serves as an
example of the estoppel principal. In that instance, the seller consented to sell
the owner the car, and after the owner presented a cheque as payment, he
was granted possession of the vehicle. After the events were discovered, the
seller was sued for conversion. The buyer's claim was successful. It's argued
that title by estoppels only binds the genuine owner and others aware of the
behaviour that forms the basis of the estoppels. On the facts, that the owner
has acted in the way to provide Ally the authorisation to sell. Hence, a close
understanding has been drawn from these exceptions to the fact that Ally is
a sales representative of the company itself. There is no wrong for her to sell
off any goods.

Conclusion
In conclusion, Ally will successfully claim a good title. This is because there
are certain exceptions for the seller to claim a good title such as apparent
authority which is also known as agency and estoppel. Likewise, Ally
represents the company and this is the nature of an agent. So the exception
on agency is foreseeable to be raised. On the other hand, for estoppel which

13 Ibid (10)
14 1 NZLR 77
had been acknowledged that Ally represents the business itself and she has
the rights to sell off those goods. Therefore, the main supplier ought to pass
the good title to Ally in accordance with the exceptions in the rule of Nemo
Dat Quod Non Habet.