Definition - What does Undisclosed Principal mean?
In agency law, an undisclosed principal is an individual whose identity remains unknown during negotiations. An undisclosed principal employs an agent for their negotiations with a third party.
The undisclosed principal doctrine is a topic widely debated among legal scholars and reformers, with some commenters working to limit situations in which courts will honor negotiations made by undisclosed principals, and other commenters seeking to preserve the protections that the doctrine offers as a time-honored tradition.
Justipedia explains Undisclosed Principal
Over the centuries, English common law tradition has allowed individuals seeking to hide their identities from parties that they wish to negotiate with through the undisclosed principal doctrine.
Often, the agent employed by an undisclosed principal is instructed to intentionally mislead third parties so that third parties believe that the agent is, in fact, the principal. In this way, third parties are unaware that they are dealing with an undisclosed principal. This practice is often an attempt to make it more difficult for a third party to know who to pursue in the event that there is a dispute.
The practice is highly controversial because negotiations jurisprudence and other contract law is often premised on a measure of honesty between the negotiating parties. On the other hand, courts have found that there are situations where negotiators have valid reasons for keeping their identities hidden, and therefore honor the practice of undisclosed principals.