Undisclosed Principal Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Undisclosed Principal, written in plain English, along with examples of how it is used.

What is Undisclosed Principal?

(n) Undisclosed principal is the real person interested in the transaction. Until a transaction is complete an agent of this interested person will deal with the party as the real owner. This practice is resorted when the seller is not interested to sell the property to the original man

History and Meaning of Undisclosed Principal

An undisclosed principal is a legal term that refers to a situation where an agent acts on behalf of a principal without disclosing their identity to a third-party. The principal remains anonymous and hidden from the third-party throughout the entire transaction. This practice is common in business dealings, such as real estate transactions, where an agent may be used to represent a buyer or seller without publicly revealing the identity of the person they are representing.

An undisclosed principal arrangement is usually used when the principal wishes to keep their identity confidential, such as when negotiating a confidential deal or when they don't want to trigger any legal implications by revealing their identity. However, the principal is still fully responsible for any legal obligations resulting from the transaction.

Examples of Undisclosed Principal

Here are a few examples of how undisclosed principal can be used in different contexts:

  • A real estate agent represents a buyer who wishes to remain anonymous. The agent enters into a purchase agreement with the seller without disclosing the buyer's identity. If the sale goes through, the undisclosed principal (the buyer) is legally bound to the terms of the agreement.
  • A contractor hires a subcontractor to perform work on a construction project without revealing to the project owner that they are working on behalf of someone else. The contractor assumes all legal liability for the subcontractor's work.
  • A person hires a lawyer to negotiate a settlement on their behalf but wants to remain anonymous. The lawyer negotiates the settlement without revealing the identity of their client. If the settlement is reached, the undisclosed principal is legally obligated to pay the settlement amount.

Legal Terms Similar to Undisclosed Principal

Here are a few related legal terms to undisclosed principal:

  • Principal - refers to a person who is legally represented by an agent in a transaction.
  • Agent - refers to a person who has the legal authority to act on behalf of a principal.
  • Power of Attorney - a legal document that grants someone the legal authority to act on behalf of another person in specific situations.
  • Subrogation - the substitution of one person or group by another in respect of a legal right or obligation.