Lloyd's Maritime and Commercial Law Quarterly
UNJUST ENRICHMENT AS THE BASIS OF UNDISCLOSED AGENCY
Luke Broadway*
It is submitted in this article that unjust enrichment provides a strong explanatory basis for the operation of the doctrine of undisclosed agency. On this paper’s framework, the direct relationship between undisclosed principal and third party arises on the operation of one core unjust factor: the discharge of the defendant’s obligation. In an attempt to return the negative unjust enrichment created by the sub-optimal allocation of obligations, the law generates a direct claim, giving rise either to restitutionary rights, or rights to subrogation. This unjust enrichment analysis helps resolve the controversy surrounding the point at which undisclosed principals acquire rights, whilst providing a stable foundation for the development of the law of undisclosed agency.
I. INTRODUCTION
Party A contracts to purchase £1000 worth of widgets from party TP.1 This sale of goods transaction is, at surface level, unnoteworthy. Let us imagine, however, that unbeknownst to TP, A is in fact an agent acting for U. U is thus an undisclosed principal. There are two agreements in this scenario, one between A and TP, and another between A and U. However, in what appears to be a deviation from the fundamentals of contract law, the doctrine of undisclosed agency creates a triangular flow of rights,2 allowing U to sue and be sued on the contract between A and TP.3
It will be submitted in this article that the law of unjust enrichment provides a strong explanatory basis for the relationship between U and TP. Following a brief exposition, the article will explore the remit of the unjust factor operating on the claimant’s discharge of an obligation of the defendant (“the discharge unjust factor”). It will be demonstrated that this unjust factor explains the rights generated between U and TP in an undisclosed agency arrangement. It is acknowledged that this unjust factor is not uncontroversial in its operation, and thus it will be set out why the generation of a direct claim following the claimant’s discharge of the defendant’s obligation is appropriate. An unjust enrichment
* Research Assistant, Law Commission of England and Wales. This article is written in a personal capacity. All views, and any errors, are my own.
1. Where appropriate throughout this paper, “A” will generally be used to refer to “agent”; “TP” will generally be used to refer to “third party”; and “U” will generally be used to refer to “undisclosed principal”.
2. RE Barnett, “Squaring Undisclosed Agency law with Contract Theory” (1987) 75 California L Rev 1969, 1983.
3. Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 1 Lloyd’s Rep 616; [1994] 2 AC 199, 207.
Unjust enrichment as the basis of undisclosed agency
443