What is an undisclosed principal?

An undisclosed principal refers to a situation where the identity of the principal is not revealed to third parties involved in a transaction. This means that the agent acts on behalf of the principal without disclosing who the principal is. The principal remains hidden from the third parties, and these parties only know about the agent engaged in the transaction.

In scenarios involving an undisclosed principal, the agent has the authority to make decisions and enter into contracts without the third party knowing that they are representing someone else. The implications of this arrangement include potential liability for the agent, as third parties can hold the agent accountable for any obligations arising from the transaction while the principal benefits from the agent's actions without directly exposing their identity.

Understanding this concept is crucial as it highlights the dynamics of agency relationships and the level of trust and transparency required in transactions, especially when considering the rights and responsibilities of both the agent and third parties involved.