Analysis of Watteau v Fenwick Case

The present research project analyses the judgment given in Watteau v Fenwick case on the basis of the facts of the case and addresses the liability of the undisclosed principal in the law of agency. The project concentrates on maintaining a healthy relation between the principal, agent, and third parties.

Running head: CASE STUDY ANALYSIS
CASE STUDY ANALYSIS
Name of the Student:
Name of the University:
Author Note:

1CASE STUDY ANALYSIS
Introduction:
The present research project analyses the judgment given in Watteau v Fenwick case on
the basis of the facts of the case and addresses the liability of the undisclosed principal in the law
of agency1. In this case, it was held that a third party could make the principal liable whom he
did not know and with whom he did not contract the transaction also. Here the agent acted
outside the scope of duty entrusted to him by the principal. The Watteau v Fenwick case
provides a landmark decision on cases dealing with the interrelation between the principal,
agents and third parties. The project concentrates on maintaining of healthy relation between the
principal, agent and third parties. According to Joslin, Robert, and Ralf Müller (2016)2, in usual
course of business, principal can be held liable only when the third party is aware of the fact that
the agent is working on the principal and when the agent works according to the duties entrusted
to him by the principal. According to Kiefel, Susan (2018), the maxim followed in the law of
agency is ‘qui facit per alium per se’ which means one who acts through another does the act
himself34. However, there lies some exceptions to it. When the agent performs some act when he
is no longer enrolled as an agent, then the principal cannot be held liable. Moreover, the principal
cannot be held responsible when the agent acts beyond the duty he is assigned to. However, in
the case of Watteau v Fenwick, the court did not follow the usual course of law and made the
principal liable as per the responsibility of an undisclosed principal. Here, the court followed the
maxim strictly and thus the decision has been criticized.
1 Watteau v Fenwick [1893] 1 QB 346
2 Delreux, Tom, and Johan Adriaensen, eds. The Principal Agent Model and the European Union. Basingstoke:
Palgrave Macmillan, 2017.
3 Gray, Anthony. Vicarious liability: critique and reform. Bloomsbury Publishing, 2018.
4 Kiefel, Susan. "Vicarious liability in tort-a search for policy, principle or justification." Judicial Review: Selected
Conference Papers: Journal of the Judicial Commission of New South Wales, The. Vol. 13. No. 4. Judicial
Commission of NSW, 2018.

2CASE STUDY ANALYSIS
In this project, the different forms of authorities in an agency, limitation of apparent
authority, balancing the relation between agent and principal with third party along with critical
analysis of the given case have been discussed.
Discussion:
The project illustrates the provision related to principal- agent relationship in the light of
the book authored by Delreux, Tom, and Johan Adriaensen (2017)5. This relationship arises out
of an agreement where one party legally appoints another to act and perform on his behalf. It also
highlights that the principal and the third party in an agent-principal agreement must maintain a
fair and healthy relation in respect of all the transactions between them. Here the parties must not
have conflicts of interest while performing the act authorized to the agent by the principal. The
law of agency finds its application in the field of commercial law concentrating a bunch of
contractual, quasi-contractual and non-contractual fiduciary relationships that includes a person,
called the agent who has been authorized to perform the duties on behalf of the principal to
create legal relations with third parties. In this of relationship, the agent is treated equally to the
principal where the latter expressly or impliedly assigns an agent to work under his control.
Agency in British law is the child of UK Commercial law that is concentrated with the
application of agency law in UK and contains a set of regulations and procedures required for the
smooth running of the business. The European Communities in the year of 1986 enacted
Directive 86/653/EEC in this aspect. In UK, it was converted into the commercial national law in
5Delreux, Tom, and Johan Adriaensen, eds. The Principal Agent Model and the European Union. Basingstoke:
Palgrave Macmillan, 2017.

3CASE STUDY ANALYSIS
the Commercial Agents Regulations 1993. The agency law and the commercial law are designed
to realize the need of the commercial community, to safeguard the interest of the parties
associated to it and to provide them with remedies when their rights and interests are breached.
According to Mitnic (2015)6, under the principal-agent relationship, the agent is entrusted
with certain responsibilities by the principal, that is, there lies some reciprocal rights and duties
between them. An agent when acts within the ambit of the authority given to him by his
principal, then the former bind the latter with the responsibilities against the third person. There
are around three types of authorities recognized by law in agent principal relationship. According
to Muller (2017)7, these three types are the actual authority, apparent authority, emergency
authority and ratified authority.
Actual authority is generally two types, express and implied. Where the agent is
expressly given authority by the principal to act on his behalf, it is called express authority.
Implied authority means an authority which is implied by customs. Custom means the duties of
other agents in the same position. Here the principal is always bound by the agent’s act. In
apparent authority, the agents appear to be authorized but in practice he is not. The principal is
still bound by agent’s action. Moreover, the principal can be held liable for the agent’s act if the
conduct of the principal causes the third party to assume that the agent is authorized8. Authority
in emergency means in case of any emergency situation, an agent may be required to act beyond
his authority even if he is not entrusted by the principal to act so. Ratified authority means when
the principal has allowed the agent to go beyond his scope of duties. When the agent acts in this
6 Mitnick, Barry M. "Agency theory." Wiley encyclopedia of management (2015): 1-6.
7 Muller, Ralf. Project governance. Routledge, 2017.
8 Gray, Anthony. Vicarious liability: critique and reform. Bloomsbury Publishing, 2018.

4CASE STUDY ANALYSIS
type of condition, it is called ratified authority9. When the principal accepted the benefit of the
unauthorized act of his agent, he is bound to accept it as if such act was done by him.
In this paragraph, emphasis has been put to apparent authority of agency10. Apparent
authority is also called ostensible authority. It is that type of authority which was not delegated to
the agent by the principal, but the principal by his action or omission made the third parties
believe that the agent is authorized to do so. According to Parness, Jeffrey, and Alexander York
(2017) 11,apparent authority can exist only when the agent is actually employed and delegated
with some actual authority by the principal. In this case, even if the agent acts beyond his
authority, the principal is bound by his agent’s contract12. In the most common practice, the
principal states to his agent about the duties he is assigned with. However, third parties unless
intimated otherwise, may perform transaction with the presumption that the agent has that
particular authority. The court will accept and act upon such presumption. Such presumption is
not only based on representations made by the principal but also to any course of dealing
between the principal and third party. When a principal allows his agent to transact on credit and
he pays such due credit to the third party, such conduct makes a presumption that he has allowed
his agent to deal on due. If the agent in future made any such unauthorized transaction and
absconds, the principal will be liable as he has given apparent authority to do so. Similar type of
apparent authority is formed when the principal allows unauthorized transactions of his agent by
performing them himself. He could not later deny such act of the agent. Such type of principal
usually called undisclosed principal because he has no access to the third party.
9 Worthington, Sarah. "Agents Behaving Badly?." (2017).
10 Parris, John. Commercial Law: Made Simple. Elsevier, 2016.
11 Parness, Jeffrey A., and Alexander Yorko. "Suing Principals Alone for the Acts of Agents." (2017).
12 Merkin, Rob, and James Devenney. "Privity of contract: statutory developments." Essays in Memory of Professor
Jill Poole. Informa Law from Routledge, 2018. 169-188.

5CASE STUDY ANALYSIS
According to Zenger, Todd, and Gubler (2016),in case of the apparent authority of
agency, the principal is called undisclosed because the agent represents himself as the principal
to the third party13. The third party is unaware of this. The agent made no statement or
declaration to the third party of such agency. Even if the agency is disclosed, the principal’s
name remains unused in the transaction. The main object of creating this type of apparent
authority agency is the convenience of the principal whether he does not want to involve into the
transaction or use his name in such transaction14.
According to Zeenat (2016), the rights and duties of the undisclosed principal are
analyzed15. Usually such principal can sue and can be sued by the third party subject to the
agreement of contract16. An undisclosed principal is liable to the third party for any transaction
made by his agent. According to García, Rosa and Joaquín (2015), where the third party is
aware of separate identity and existence of the principal, the third party can sue the principal or
the agent17.
The concept of apparent authority or ostensible authority was existent prior to the famous
case of Watteau v. Fenwick. In another case of Pickering v Busk (1812)18, it was decided that
when a person by his words or act represents or allows another person to be represented in such a
way that the latter has authority to act for him, then the principal is liable for the acts of such
other person. It will be presumed that such act is done by the principal only. The principle of
13 Zenger, Todd, and Timothy Gubler. "Agency Problems." The Palgrave Encyclopedia of Strategic
Management (2016): 1-4.
14 Laski, Harold J. "Basis of Vicarious Liability." Yale LJ 26 (1916): 105.
15 Beebeejaun, Zeenat. "12 Law of Agency: Legal Relationships." Commercial Law (2016).
16 Baker, John. Introduction to English Legal History. Oxford University Press, 2019.
17 García, Jose A., Rosa Rodriguez‐Sánchez, and Joaquín Fdez‐Valdivia. "The principal‐agent problem in peer
review." Journal of the Association for Information Science and Technology 66.2 (2015): 297-308.
18 Pickering v. Busk (1812) 15 East. 38

6CASE STUDY ANALYSIS
apparent authority as observed in Watteau v Fenwick has been followed in several other case in
the later years. In the case of Goodhart and Hamson (1931), similar observation is found where it
was held that the principal is bound as he has allowed his agent to have such authority and so he
was estopped from denying it later. In the case of Freeman & Lockyer v Buckhurst Park
Properties19 the court observed that it is a legal relation between the principal and agent and the
principal is stopped from anything which he has allowed before.
In this part of the writing, the case of Watteau v Fenwick has been elaborated. In this
case, the plaintiff, Watteau, supplied cigars and Bovril, a salty extract of meat on credit to a beer
house named “Victoria Hotel”, situated at Middlesbrough. The beer house was managed by
Humble who had previously transferred his tavern to Messrs. Fenwick and Company. Humble’s
name remained on the nameplate of the hotel and the license also retained his name. Humble was
authorized by the defendants to buy ales and mineral water for the tavern. However, Humble
bought cigars out of his given authority. The supplier who was the plaintiff in this case sued the
brewers to collect the price of cigars unpaid by Humble. In the trial, the defendants contested that
as Humble made transaction out of his authority entrusted by the defendants, they should not be
held responsible to pay the unpaid prices. The court however held against the defendants and
decided that they are liable to pay the dues as Humble acted as tavern manager when the
transaction actually occurred. The defendants again filed an appeal in the Queen’s Bench. The
Bench did not alter the decision of the trial court and affirmed it. The court held that the
defendants being the principal were liable for the acts of his agent. However, the decision has
been highly criticized because the case decided that an undisclosed principal was held for the act
of his agent where the agent was acting outside the ambit of his responsibilities.
19 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

7CASE STUDY ANALYSIS
From the above discussion, the relation between apparent authority agency and estoppels
is illustrated according to Bendickson, Josh, et al (2016)20. In several countries including US,
UK and Canada, ostensible authority is related to the doctrine of agency law. According to
Keating (2016),pparent authority indicates a scenario where a third party would consider that an
agent had an authority to act on behalf of his principal21. It signifies that an agent’s action will
bind a principal even in the cases where the agent has no actual authority. The principal cannot
deny the agent’s act and has to bear the consequences of such act. He is estopped from denying it
as he had allowed it before. The third party is not aware whether the agent had actual or apparent
authority. He deals with the agent as if he is dealing with the principal. Since the principal has
allowed the agent to work on his behalf, he cannot deny it later. He is estopped. This is called the
principal of estopple22.
According to Boučková, Markéta (2015),the rights of third party when infringed, he can
utilize its elective rights either against the agent or against the undisclosed principal. Here the
doctrine of privity is strictly applied23. Hence, liability flows between the parties to the contract
and thus third party can sue agent also24. Again, if third party sues principal, he waived his right
to sue agent. In rare cases, third party can sue both principal and agent when both of them
commit any fraud upon third party together. However, when rights of third party are not
included, then corresponding liabilities cannot be included too. Hence, if undisclosed principal is
barred from intervening in any contract, other parties will also be excluded from suing that
20 Bendickson, Josh, et al. "Agency theory: the times, they are a-changin’." Management Decision 54.1 (2016): 174-
193.
21 Keating, Gregory C. "Liability Without Regard to Fault: A Comment on Goldberg & Zipursky." (2016).
22 Cook, Walter Wheeler. "Agency by estoppel." Colum. L. Rev. 5 (1905): 36.
23 Saintier, Séverine, and Rob Merkin. "Privity of contract: statutory developments." Essays in Memory of Professor
Jill Poole. Informa Law from Routledge, 2018. 137-156.
24 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury
Publishing, 2016.

8CASE STUDY ANALYSIS
principal. When there lies no principal agent relationship in the contract, agent cannot sue
principal25. It was observed in the Boulton v Jones and Another (1857)26. In this case, the
defendants who used to deal with B regularly, sent a written order for goods to B. the plaintiff
who brought B’s business executed the order without informing the defendants that those goods
were not supplied by B. The bookkeeper of the plaintiff changed the name in the invoice. The
new invoice was created in the plaintiff’s name only. It was argued that the plaintiff did not
notify the defendant about the change and represented as an agent of B. but it was held that the
plaintiff could not sue the defendants for the price of goods as there was no agent principal
relationship between them. Similarly, when the identity of the agent is not critical, then principal
can enforce rights against third party as was seen in Fred Drughorn v Rederiaktiebolaget
Transatlantic (1919)27. In this case a charterparty was signed on behalf on a person who is known
as charterer. House of the Lords held that it is consistent with the named charterer who entered
into the Charterparty as an agent. Hence,the employer had a right to sue as undisclosed principal
and enforce the charterparty against owners. In another case of Nash v Dix (1898)28, it was held
that if Agent is a buyer in his own right, third party cannot avail the privileges of the doctrine of
undisclosed principal. Again, as discussed before third party has a right to sue either the principal
or the agent and not both together. The agent has to elect between the two. It was affirmed in the
case of Clarkson Booker Ltd v Andjel (1964)29.
In this part, limitation of the doctrine of apparent authority of agency has been discussed.
The decision awarded in the given case attracts lots of criticism. Academics and jurists have
condemned the decision because the undisclosed principal was held liable for the act of the agent
25 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
26 Boulton v Jones (1857) 2 H & N 564
27 Fred Drughorn Ltd v Rederiaktiebolaget Trans-Atlantic [1919] AC 203
28 Nash v Dix (1898) 78 LT 445
29 Clarkson Booker v Andjel[1964] 2 QB 775

9CASE STUDY ANALYSIS
although the agent acted beyond his authority. The agent was authorized to buy ales and mineral
water. However, he went beyond his authority and bought cigars and Bovril on credit. The
principal was unaware of such transaction, yet he was penalized. Thus the decision made was
controversial as it affects the undisclosed principal without his fault. Another area of criticism is
that whether an undisclosed principal can commit a fraud behind the doctrine of undisclosed
principal. This can be explained in the light of two cases of Said v Butt30 and Boyter v
Thomson31. In the case of Said v Butt, a film critic tried to purchase a ticket on the first day first
show to review a movie. But he could not secure such ticket. He got a friend who bought a ticket
for him without disclosing that he bought such ticket for his critic friend. But the management of
the theater did not allow him to enter into the theatre. He sued the management for this. However
it was dismissed as the purchaser’s identity is significant in the formation of a contract and that
the failure to disclose such fact could not succeed in the case. In the case of Boyter v Thompson,
Thomson was a private seller. He sold a cruiser through an agent to Boyter. Boyter did not know
about agency and thought that the agent was the actual owner. The cruiser found to be defective.
Due to this, Boyter sued Thompson. This being the case of undisclosed principal, Boyter did not
have any option to know that Thompson was the actual seller. But the court held Thompson
liable for sale of such defective boat. In the case of Kinahan V Parry32, similar observation was
made. In another case of Edmunds v Bushell and Jones33, it is held that undisclosed principal is
liable for the acts of his agent even though such acts are not permitted by the principal.
Similarly some other cases can be discussed where questions regarding the nature and
extent of liability of undisclosed principal arose. In the case of Sin Yin Kwan v Eastern
30 Said v. Butt [1920] 3 K.B. 497
31 Boyter V.Thomson [1995] 3 WLR 36
32 Kinahan v Parry [1910] 2 KB 38
33 Edmunds (PO) v Bushell And Jones: 1865

10CASE STUDY ANALYSIS
Insurance Co Ltd (1993)34, the doctrine of undisclosed principal is summarized. In this case,
Axelson Co. Ltd. was the owners of a ship. Its employees died in an accident. Under Employee
compensation Ordinance, the employees were awarded damages. The company was wound up
and the declared damages were not given. The deprived representatives of the employees sued
the insurance company under third party rights. Insurance company contented that the party
insured was of another company and not of Axelson. It was not shown anywhere that the another
company was an agent of Axelson. It was known to insurers that Richstone was an agent of
Axelson. In this case the said doctrine is illustrated. It says that an undisclosed principal can sue
and also be sued in a contract made by an agent on behalf of the principal authority, provided it
is acting under the authority he is entitled with. The agent must have intention to act on behalf of
his principal. Like the principal, the agent can also sue and be sued. The defence or remedy
available to the agent is also available to the principal and also against him. However, in the
contract if there is any stipulation, there can be exclusion of the principal’s right to sue and also
be sued. Moreover, personal agreements cannot be entertained under this doctrine.
However, according to Panda, Brahmadev, and N. M. Leepsa (2017)35,when the third
party executes a contract with the agent having considered any special capacity or character of
the agent, then such third party cannot sue the principal even if the principal is disclosed. Special
character means any special knowledge, skill, economic capacity and others. This was observed
in the case of Greer v. Downs Supply (1927)36. In this case, the third party entered into contract
with the agent as the latter was his debtor. Again, principal is not included in the contract when
the agent represents himself as the true principal truly or by false means. It was held in the case
34 Siu Yin Kwan v Eastern Insurance Co. Ltd [1994] 2 AC 199
35 Bendickson, Josh, et al. "Agency theory: the times, they are a-changin’." Management Decision 54.1 (2016): 174-
193.
36 Greer v Downs Supply Ltd [1927] 2 KB 28

11CASE STUDY ANALYSIS
of Humble v Hunter (1848)37. When the agent executes a contract in his own right, third party
cannot seek help from the doctrine of undisclosed principal. In the case of Nash v. Dix38 it was
observed by the court. When the principal is expressly not included in the contract, he cannot be
held liable for the act of the agent. In the case of United Kingdom Insurance Association v
Nevill39, Nevill was the principal and Tully was the agent under him. Both of them were part
owners of a ship. Tully insured the ship with the UK Association being its member. Nevill was
unaware of this. He was not its member too. According to the rule of Association only members
are liable for the premiums. Later on, Tully became bankrupt and the Association claimed
payment from Nevill. It was hel that the terms of the association is applicable to its members
only, Nevill not being its member, is excluded from any claim from the association. The UK
association is the third party in this case. It cannot be held the principal Nevill liable when it is
expressly mentioned in the contract that he is debarred. Hence with the support of many leading
cases, the concept of principal-agent relationship is being thoroughly analyzed.
Conclusion:
From the above discussion, it can be concluded the court has adopted a unique approach
while deciding the Watteau v Fentick case. Moreover it is found that apparent authority of an
agent has certain limitations which cannot be overlooked. There must be a balance between the
rights of the principal and the third party. Neither the principal nor the third party shall be
prejudiced by the act of the agent. In the case of Watteau v Fenwick, we found that court has
decided in the favour of the agent because of the implied authority of the principal. However it
37 Humble v. Hunter (1848) 12 Q. B. 310
38 Nash v Dix (1898) 78 LT 445
39 UK Insurance Association v Nevill (1887) 19 QBD 110

12CASE STUDY ANALYSIS
did not consider the fact that the agent acted beyond his authority entrusted to him by his
principal and the third party had no knowledge that the agent was not the real principal.

13CASE STUDY ANALYSIS
References:
Books and Journals:
Baker, John. Introduction to English Legal History. Oxford University Press, 2019.
Beebeejaun, Zeenat. "12 Law of Agency: Legal Relationships." Commercial Law (2016).
Bendickson, Josh, et al. "Agency theory: the times, they are a-changin’." Management
Decision 54.1 (2016): 174-193.
Boučková, Markéta. "Management accounting and agency theory." Procedia Economics and
Finance 25 (2015): 5-13.
Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing, 2016.
Cook, Walter Wheeler. "Agency by estoppel." Colum. L. Rev. 5 (1905): 36.
Delreux, Tom, and Johan Adriaensen, eds. The Principal Agent Model and the European Union.
Basingstoke: Palgrave Macmillan, 2017.
García, Jose A., Rosa Rodriguez‐Sánchez, and Joaquín Fdez‐Valdivia. "The principal‐agent
problem in peer review." Journal of the Association for Information Science and
Technology 66.2 (2015): 297-308.
Gray, Anthony. Vicarious liability: critique and reform. Bloomsbury Publishing, 2018. Delreux,
Tom, and Johan Adriaensen, eds. The Principal Agent Model and the European Union.
Basingstoke: Palgrave Macmillan, 2017.

14CASE STUDY ANALYSIS
Gray, Anthony. Vicarious liability: critique and reform. Bloomsbury Publishing, 2018.
Kiefel, Susan. "Vicarious liability in tort-a search for policy, principle or justification." Judicial
Review: Selected Conference Papers: Journal of the Judicial Commission of New South Wales,
The. Vol. 13. No. 4. Judicial Commission of NSW, 2018.
Merkin, Rob, and James Devenney. "Privity of contract: statutory developments." Essays in
Memory of Professor Jill Poole. Informa Law from Routledge, 2018. 169-188.
Mitnick, Barry M. "Agency theory." Wiley encyclopedia of management (2015): 1-6.
Muller, Ralf. Project governance. Routledge, 2017.
Panda, Brahmadev, and N. M. Leepsa. "Agency theory: Review of theory and evidence on
problems and perspectives." Indian Journal of Corporate Governance 10.1 (2017): 74-95.
Parness, Jeffrey A., and Alexander Yorko. "Suing Principals Alone for the Acts of Agents."
(2017).
Parris, John. Commercial Law: Made Simple. Elsevier, 2016.
Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
Saintier, Séverine, and Rob Merkin. "Privity of contract: statutory developments." Essays in
Memory of Professor Jill Poole. Informa Law from Routledge, 2018. 137-156.
Worthington, Sarah. "Agents Behaving Badly?." (2017).
Zenger, Todd, and Timothy Gubler. "Agency Problems." The Palgrave Encyclopedia of Strategic
Management (2016): 1-4.
Cases:
Boulton v Jones (1857) 2 H & N 564

15CASE STUDY ANALYSIS
Boyter V.Thomson [1995] 3 WLR 36
Clarkson Booker v Andjel[1964] 2 QB 775
Edmunds (PO) v Bushell And Jones: 1865
Fred Drughorn Ltd v Rederiaktiebolaget Trans-Atlantic [1919] AC 203
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Greer v Downs Supply Ltd [1927] 2 KB 28
Humble v. Hunter (1848) 12 Q. B. 310
Kinahan v Parry [1910] 2 KB 38
Nash v Dix (1898) 78 LT 445
Pickering v. Busk (1812) 15 East. 38
Said v. Butt [1920] 3 K.B. 497
Siu Yin Kwan v Eastern Insurance Co. Ltd [1994] 2 AC 199
UK Insurance Association v Nevill (1887) 19 QBD 110
Watteau v Fenwick [1893] 1 QB 346