Sally Rider makes an agreement with Hank Helper to buy a particular race horse f

Question

Sally Rider makes an agreement with Hank Helper to buy a particular race horse for her.

Sally asks Hank not to reveal her identity when negotiating for the horse's purchase. Hank makes a deal with Spirit Stables, the owner of the horse Sally wants. Hank makes a down payment under the terms of a valid contract for the purchase/sale of the horse. Sally, however, later changes her mind and does not provide the rest of the purchase price. Spirit Stables sues Hank Helper for breach of contract. If he loses this lawsuit, Hank wants to hold Sally liable for whatever damages he has to pay in the lawsuit brought by the stables.

THIS MIGHT BE ONE OF TWO TYPES OF RELATIONSHIPS INVOLVING A PRINCIPAL AND AGENT IN A CONTRACT SITUATION. WHAT ARE THOSE TWO TYPES?

DISCUSS WHAT REASONS SALLY MIGHT HAVE FOR NOT WANTING HER IDENTITY TO BE REVEALED?

CAN HANK EXPECT SALLY TO BE HELD LIABLE FOR ANY DAMAGES HE MIGHT HAVE TO PAY IN THE LAWSUIT BROUGHT AGAINST HIM BY SPIRIT STABLES? WHY OR WHY NOT?

Explanation / Answer

The two types of relationships involving a principal and agent are an employer -employee relationship and employer- independent contractor relationship. Employees who deal with third parties are generally deemed to be agents of their employer and the employers or principals are bound by the acts of employees or agents to a third party. Independent contractors are parties who contracts with another to perform something for him or her but the other has no control over the details of their physical performance. Independent contractor is not an employee but may be an agent. In this case Sally Rider, the principal has hired Hank Helper to buy the race horse but has no physical control over the work done by Hank. Hence Hank would be an independent contractor of Sally.

By insisting not to reveal the identity, sally has become an undisclosed principal and the agent, Hank also becomes liable as a party to the contract along with Sally. Sally would be liable if failed to perform the duty as per the contract. Once the identity is revealed, the third party can elect to hold either principal or the agent liable on the contract. The undisclosed principal also can require the third party to fulfill the contract except certain circumstances. Sally might have wanted not to disclose her identity to ensure that the agent performs well as she has no control over the agent’s work since he is an independant contractor and to take the benefits of being an undisclosed principal as mentioned above.

Hank can expect Sally to be liable for the damages that he might have to pay in the lawsuit brought against him by Spirit Stables. As an undisclosed principal, Sally is liable for the damages paid by the agent to the third party in a valid contract. The principal has the duty to perform even though the identity is undisclosed and the failure to perform the duty will make the principal ultimately liable.

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