Key takeaways
Undisclosed principals can enforce contracts
Agents may bind principals even if unnamed.
Informal communications can establish authority
Messages via Whatsapp and verbal approvals helped confirm the agent was acting on the principal’s behalf.
Contract terms must clearly exclude principals
Silence on principals doesn’t block enforcement.
MSH Ltd -v- HCS Ltd [2025] EWHC 815 (Comm)
The Court has found that a buyer under a commodities contract entered into that contract on behalf of one of its established customers and as agent for that up-stream customer, which the Court found to be an undisclosed principal. Therefore, the tribunal that had issued an arbitral award pursuant to a dispute under the contract had substantive jurisdiction over the customer/principal.
The arbitration award issued in favour of the customer as claimant (HCS Ltd) was, therefore, allowed to stand as, on the facts of this case, the claimant had proper locus to commence the arbitration notwithstanding the involvement of its intermediary agent.
The applicable legal principles
In summary:
An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority.
In entering into the contract, the agent must intend to act on the principal’s behalf.
The agent of an undisclosed principal may also sue and be sued on the contract.
Any defence which the third party may have against the agent is available against his principal.
The terms of the contract may, expressly or by implication, exclude the principal’s right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.
For a party to be an undisclosed principal it must be established that:
the agent contracted with and within the scope of the actual authority of the undisclosed principal;
at the time of the relevant contract, the agent intended to contract on the principal’s behalf; and
there is nothing in the contract or surrounding circumstances showing that the agent is the true principal and which excludes the making of a contract with an undisclosed principal.
The background facts
On the basis of the evidence, the Court found as follows:
On or around 28 September 2020, MSH Ltd (MSH), as seller, and CTW Ltd (CTW), as buyer, entered into a contract for the sale and purchase of Colombian nut coke (the Contract). At the time the Contract was concluded, HCS Ltd (HCS) was an established customer of CTW since around the end of 2018 and the only customer whose business was handled by Mr OD, who was CTW’s head of global trading solid fuels at the relevant time.
CTW was usually remunerated by an agreed percentage of profits for transactions it arranged for its customers, although sometimes it accepted an agreed fee. Example invoices in respect of prior transactions in which CTW and HCS were involved described the services provided as “facilitation of sale/purchase” or “share of proceeds”. As a matter of general practice, remuneration was not always agreed in advance because important data inputs into determining the profit were very frequently not available until some later point (e.g. after product purchased had been on-sold and certain costs of performance such as demurrage were ascertained).
There was no written agency agreement, with contact between Ms PP, HCS’s CFO, and Mr OD being largely by regular and informal telephone, text, WhatsApp and the occasional email communications.
CTW had no standing authority to contract on HCS’s behalf when not doing “package” or “back-to-back” deals. Deals that were “front to back” had to be approved by Ms PP on a “deal-by-deal” basis. CTW’s actual authority to commit HCS to the Contract depended on showing that specific authority was granted before the Contract was concluded.
CTW’s general business model, and in particular its dealings with HCS, was concerned to avoid principal risk, because CTW did not have standing credit lines available to open and fund the letters of credit necessary to purchase goods. However, this was not invariably the position. Nevertheless, the Court was satisfied on the evidence that CTW’s business strategy when HCS was its client was to contract as agent, with HCS providing the finance. That conclusion was supported by the following:
documents showing occasions when Mr OD sought HCS’s approval before contracts were concluded;
the absence of any sale contracts between CTW and HCS;
the terms of invoices provided by CTW to HCS, which were never for the price of goods being bought from or sold to HCS Ltd, but for “share of proceeds resulting from the purchase and sale” or “facilitation of sale/purchase”; and
the fact that the funding came from HCS, which was a trading house rather than a finance house, and therefore more likely to be funding acquisitions for itself rather than someone else.
The Court concluded that CTW intended to enter into the Contract on HCS’ behalf rather than as a principal.
There was some dispute between the parties as to when the Contract was concluded and whether and when specific authority was given to CTW to enter into the Contract on HCS’ behalf
The Court found on the evidence that legal commitment was reached by 28 September 2020, that CTW both intended to act as HCS’ agent in entering into the Contract and was specifically authorised by HCS to do so by 28 September 2020. Further or alternatively, the parties’ final signed contract, which incorporated an entire agreement clause, was executed on 13/14 October 2020 and HCS gave the relevant authority in WhatsApp exchanges on 12 and 13 October 2020.
Finally, the Court held that the terms of the Contract did not preclude HCS enforcing the Contract as undisclosed principal. Among other things, the fact that the Contract identified HCS, rather than the named buyer, as the party providing the letter of credit did not preclude HCS from being an undisclosed principal. As to the entire agreement clause, in the circumstances and context of this case, the Contract contemplated someone other than a named signatory providing the mechanism to perform CTW’s characteristic obligation of payment. Nor did the clauses on confidentiality and limitations on assignment preclude the operation of the undisclosed principal doctrine.
The seller’s challenge to the arbitral award on the grounds of lack of jurisdiction, therefore, failed.
Comment
The judgment does not reveal the identity of the parties, nor the nature of the underlying dispute. Nonetheless, it usefully clarifies the relevant principles for deciding whether a party is an authorised agent acting on behalf of an undisclosed principal.
The decision highlights that it may be useful in appropriate cases to have a written agency agreement, particularly where the parties operate in a commercial environment, such as the trade/commodities sector, where the majority of communications are informal and often purely oral.
