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Simple English definitions for legal terms
undisclosed principal
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A quick definition of undisclosed principal:
An undisclosed principal is when someone hires another person to do something for them, but they don't tell anyone that they are the one in charge. The person doing the job is called an agent. If the agent does something wrong, the person who hired them can still be held responsible, even if no one knew they were involved. However, if the person who hired the agent didn't do anything to let others know they were in charge, they might have to pay for any problems that come up.
A more thorough explanation:
Under agency law, an undisclosed principal is when a third party does not know that a principal exists, but the principal has authorized an agent to act on their behalf. The agent does not tell the third party that they are forming the contract on behalf of the principal. However, the principal is still bound if the agent acts with their actual, express, or implied authority.
For example, if a person hires a real estate agent to sell their house, but the agent does not tell the buyer that they are acting on behalf of a principal, the principal is an undisclosed principal. If the agent signs a contract with the buyer, the principal is still bound by the contract even though the buyer did not know they existed.
According to the law, an undisclosed principal may be held liable for certain unauthorized transactions if a third party has made a detrimental change in position, the principal had notice of the agent's conduct, the conduct might induce third parties to change their positions, and the principal did not take reasonable steps to notify third parties of the facts.