Seller who learns the buyer was an agent: whom to sue for the price

Law.

1. Agent not normally bound (s. 230). An agent who contracts for his principal can neither enforce the contract personally nor be bound by it, unless there is a contract to that effect. Such a contract is presumed in three cases: where the agent buys or sells goods for a merchant resident abroad, where he does not disclose the name of his principal, and where the principal, though disclosed, cannot be sued.
2. Principal not disclosed (s. 231). Where an agent contracts with a person who neither knows nor has reason to suspect that he is an agent, the principal may require the contract to be performed; and that person has the same rights against the principal as he would have had against the agent had the agent been the principal. If the principal reveals himself before the contract is completed, the other party may refuse to go on with it if he shows that he would not have contracted had he known who the principal was, or that the agent was not a principal.
3. Principal takes the contract as it stands (s. 232). A principal who claims performance gets it subject to the rights and obligations existing between the agent and the other party, such as a set-off.
4. Choice of defendant (s. 233). Where the agent is personally liable, the person who dealt with him may hold the agent, or the principal, or both of them, liable.
5. Loss of that choice (s. 234). If that person induces the agent to act on the belief that only the principal will be held liable, he cannot later hold the agent liable; and if he induces the principal to act on the belief that only the agent will be held liable, he cannot later hold the principal liable.

Application.

• When X contracted, he did not know that Y was buying for anyone else; he found out only afterwards. Y disclosed neither that he had a principal nor, therefore, Z's name, so Y is presumed to have agreed to be personally bound (s. 230) and is liable to X for the price of the 120 wheat bags as if he were the buyer.
• Z is the real buyer. Under s. 231, X has against Z the same rights he would have had against Y had Y been buying on his own account, so X can also claim the price from Z.
• Since Y is personally liable, s. 233 gives X the choice: he may sue Y, or Z, or both of them. The Act's own illustration to s. 233 is this case: a seller of 100 bales of cotton who later learns that the buyer was an agent may sue either the buyer or his principal, or both, for the price.
• The facts show nothing that would bring in s. 234: X has not led Y to act on the belief that only Z would be held liable, or led Z to act on the belief that only Y would be.

Advice. X may sue Y, or Z, or both of them, for the price of the 120 wheat bags (ss. 230, 231 and 233). He loses the right against one of them only if, after learning the truth, he induces that one to act on the belief that the other alone will be held liable (s. 234), for example by telling Y that he will look only to Z for payment, after which Y settles his own accounts with Z.