Watteau v Fenwick [1893] 1 Q.B. 346; a case subject to vast criticism

The case of Watteau v Fenwick has been criticized because it was decided that an undisclosed principal could be held liable for an act of the agent, which had been expressly forbidden. Some claim that the case was decided upon apparent authority, yet it is doubted whether this contention is valid because the principal was not known.[1] An agency by ratification, which allows a known principal to ratify a contract and be bound by it, could not be inferred because Humble did not contract as an agent.[2] Therefore, Wills J decided that   

           “Once it has been established that the defendant was the real principal, the ordinary doctrine as to principal and agent applies – that the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority. It is said that it is only so where there has been a holding out of authority…But I do not think so. Otherwise in every case of undisclosed principal, or at least in every case where the fact of there being a principal was undisclosed, the secret limitation of authority would prevail and defeat the action of the person dealing with the agent and then discovering that he was an agent and had a principal”. 

In my opinion, the decision was correct because a different outcome could result to undisclosed principals being able to hire insolvent agents to make contracts for them, and then allege that the contracts were unauthorized while sharing the money with the agent in secret.

Further Reading:

Dobson, P. & Stokes, R. (2008) ‘Commercial Law’ (7^th Edn) Thomson Sweet & Maxwell.

Brown, I. (2001) ‘Commercial Law’ Butterworths Lexis Nexis

Bradgate, R. (2000) ‘Commercial Law’ (3^rd Edn) London: LexisNexis Butterworths.

Bradgate, R & White, F. (2005) ‘Commercial Law’ Oxford: Oxford University Press.

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[1] Goodhart and Hamson (1931) Cambridge Law Journal 320  

[2] Kevin M Rogers(1985 ) ‘A Case harshly treated? Watteau v Fenwick re-evaluated’ Cambridge Law Journal 363  found at: http://www.herts.ac.uk/fms/documents/schools/law/HLJ_V2I2_Rogers.pdf