Jim, an undisclosed principal, authorized Rick to act as his agent in securing a contract for the purchase of some plain white paper. Rick, without informing Sam that he was acting on behalf of a principal, entered into a contract with Sam to purchase the paper. If Jim repudiates the contract with Sam, which of the following is correct?
A. Rick may not enforce the contract against Sam.
B. Sam may obtain specific performance, compelling Jim to perform on the contract.
C. Rick will be released from his contractual obligations to Sam if he discloses Jim’s identity.
D. Upon learning that Jim is the principal, Sam may elect to hold either Jim or Rick liable on the contract.
Answer:D
D is corrent because once the third party learns the identity of an undisclosed principal, the third party may elect to hold either the agent or the principal liable on the contract.
A is incorrect because an agent acting on behalf of an undisclosed principal is a party to the contract. Rick may, therefore, enforce the contract against Sam.
B is incorrect because specific performance is not an appropriate remedy when money damages will adequately compensate the plaintiff. Plain white paper is not unique; consequently, specific performance is not available.
C is incorrect because Sam did not know that Rick was acting as an agent at the time the contract was entered into; Rick is liable as a party to the contract. The mere disclosure of the existence and identity of the principal after the parties have entered into the contract does not relieve the agent of his contractual obligations.
