Keighley, Maxsted & Co v Durant

Lorp Macnacuten. My Lords, I am of the same
opinion.

I dissent very respectfully from the judgments of the majority
of the Court of Appeal, and I agree entirely with the Master of
the Rolls.

It is said that there is no decision one way or the other. It

245

H. L. (E.)
1901

——~
KErIGHLry,.
MAxstTEep

& Co.

v.
DURANT.
Earl of Halsbury
L.C.

is quite true that there is no reported case in which the precise -

question discussed in the judgments under review has been
raised and determined, and it may be that Collins L.J. is
right in thinking that there is no dictum in which that question
has been dealt with pointedly and advisedly. But there is a
stream of authority all tending in one direction, which it is
impossible, I think, to gainsay or resist, and which has been
treated as conclusive by text-writers of acknowledged eminence
both in this country and in America. And when your Lord-
ships are told that there is no actual decision, nor even any
carefully considered expression of opinion in favour of the
view which the Master of the Rolls took to be settled law,
I cannot help recalling the observation of a great judge:
"The clearer a thing is," said James L.J., '' the more difficult
it is to find any express authority or any dictum exactly to
the point."' (1)

My Lords, I will not trouble you by going through the roll
of cases bearing upon the question. It would be impossible, I
think, with advantage to add anything to the very able and
exhaustive review of the Master of the Rolls. I will only say

(1) (1875) L. R. 10 Ch. 526.

246

H. L. (E.)
1901

—m~
KBIGHLEY,
MAxsTED
& Co.

Ve
DURANT.

Lord

Macnaghten.

HOUSE OF LORDS [1901]

a few words in reference to the two grounds on which his con-
clusion is challenged by Collins L.J. Having satisfied himself
that the case was not governed by authority, the learned Lord
Justice ends his judgment by declaring that he was bound to
decide in accordance with what he regarded to be " principle
and common sense."

In appealing to common sense, I do not for a moment
suppose that Collins L.J. meant to intimate that the con-
clusion at which he had arrived, believing himself to be
untrammelled by authority, was a self-evident proposition
which ought to command the assent of all sensible persons.
Admittedly, Lord Cairns and Lord Esher, both sensible
persons I should say, took the other view. I rather suppose
that the learned Lord Justice meant to appeal to considera-
tions of convenience. But it is difficult to understand how
this new departure, if it be a new departure, can be required by
any consideration of that sort, seeing that in all these years the
question has never before presented itself for decision but once,
and then the case was decided on other grounds.

With all deference, I much doubt whether the decision under
appeal is in accordance with good sense, whatever that expres-
sion means. Still less do I think it is in accordance with
principle.

As a general rule, only persons who are parties to a contract,
acting either by themselves or by an authorized agent, can sue
or be sued on the contract. A stranger cannot enforce the
contract, nor can it be enforced against a stranger. That is
the rule; but there are exceptions. The most remarkable
exception, I think, results from the doctrine of ratification as
established in English law. That doctrine is thus stated by
Tindal C.J. in Wilson v. Tumman (1): "That an act done, for
another, by a person, not assuming to act for himself, but for
such other person, though without any precedent authority
whatever, becomes the act of the principal, if subsequently
ratified by him, is the known and well-established rule of law.
In that case the principal is bound by the act, whether it be
for his detriment or his advantage, and whether it be founded

(1) (1843) 6 M. & G. at p. 242.

A.C. AND PRIVY COUNCIL.

on a tort or on a contract, to the same effect as by, and with

all the consequences which follow from, the same act done by

his previous authority." And so by a wholesome and con-

'venient fiction, a person ratifying the act of another, who,
without authority, has made a contract openly and avowedly
on his behalf, is deemed to be, though in fact he was not, a
party to the contract. Does the fiction cover the case of a
person who makes no avowal at all, but assumes to act for
himself and for no one else? If Tindal C.J.'s statement of the
law is accurate, it would seem to exclude the case of a person
who may intend to act for another, but at the same time keeps
his intention locked up in his own breast; for it cannot be said
that a person who so conducts himself does assume to act for
anybody but himself. But ought the doctrine of ratification to
be extended to such a case? On principle I should say certainly
not. Itis, I think, a well-established principle in English law
that civil obligations are not to be created by, or founded upon,

undisclosed intentions. That is a very old principle. Lord —

Blackburn, enforcing it in the case of Brogden v. Metropolitan
Ry. Co. (1), traces it back to the year-books: of Edward IV.
(17 Edw. 4, 2, pl. 2) and to a quaint judgment of Brian C.J.:
"Tt is common learning," said that Chief Justice, who was a
great authority in those days, '' that the thought of a man is not
triable, for the Devil has not knowledge of man's thoughts." (2)
'Sir E. Fry quotes the same observation in his work on Specific
Performance, s. 295, p. 183, 38rd ed. It is, I think, a sound
maxim—at least, in its legal aspect: and in my opinion it is
mot to be put aside or disregarded merely because it may be
that, in a case like the present, no injustice might be done
to the actual parties to the contract by giving effect to the
undisclosed intentions of a would-be agent.

My Lords, I have nothing more to add on the question of
'principle. But I should like to say a word or two about the case
of Bird v. ae (3), on which Collins L.J. seems to place his

(1) (1877) 2 App. Cas. at p. ser¥ trie, car le Diable n'ad conusance
692. de l'entent de home."

(2) In the original thus: "comen (8) (1850) 4 Ex. 786; 19 L. J.
erudition est G Pentent d'un home ne (N.S.) Ex. 154; 14 Jur. 182.

247

H. L. (E.)

1901
—~
KEIGHLEY,
MaxstTEp
& Co.
V.
DURANT.

Lord
Macnaghten.

—_

248

H. L. (E)
1901

—m
KEIGHLEY,
Maxsrrep
& Co.
Vv
Durant.

Lord
Macnaghten.

HOUSE OF LORDS [1901}

chief reliance. The case is instructive, I think, and useful,
because it tends to shake one's confidence in the infallibility of
reports, which always seem to carry the more weight the less.
opportunity there is of testing their accuracy. Why should
an obscure report be taken for gospel merely because it is
old? Bird v. Brown (1) was heard by four judges. Only one
judgment was given. The Exchequer Reports attribute the
judgment to Rolfe B. The Law Journal ascribes it to Parke B.
The Jurist puts it in the mouth of Pollock C.B. No one gives.
it to the fourth judge; but then there were only three sets of
reports current at the time. The Weekly Reporter did not:
begin till later.

The passage in the Exchequer Reports on which the learned
Lord Justice relies begins with these words: "If A. B., un-
authorized by me, makes a contract on my behalf with J. §.,
which I afterwards recognise and adopt, there is no difficulty
in dealing with it as having been originally made by my autho-
rity. J. 8S. entered into the contract on the understanding that:
he was dealing with me, and when I afterwards agreed to admit.
that such was the case, J. S. is precisely in the condition in
which he meant to be.'' So far no exception can be taken to:
the language of the learned judge, whoever he was. Then
follows this sentence, on which Collins L.J. lays a stress,
denoted by italics, in his printed judgment: "or if he did not.
believe A. B. to be acting for me, his condition is not altered
by my adoption of the agency, for he may sue A. B. as principal
at his option, and has the same equities against me if I sue-
which he would have had against A. B." Now, I cannot.
understand that. The assumption is that A. B., unauthorized
by me, has made a contract on my behalf with J. S. Why J. 8.
should not believe that A. B. was acting for me, when A. B.
said he was, I do not understand, nor can I see why his want
of belief should give him a right to sue A. B. as principal when.
the contract was made on the representation that A. B. was.
not principal. The sentence reads like an irrelevant gloss
which has crept into the text. I think there must be some
mistake somewhere, and it is a consolation to one who is

(1) 4 Ex. 786; 19 L. J. (N.S.) Ex. 154; 14 Jur. 182.

a

Aw C: AND PRIVY COUNCIL.

greatly puzzled by the passage to find that it does not occur in
the report of the case in the Law Journal.
I think the appeal must be allowed.

Lorp SHAND. My Lords, I am also of opinion that the
judgment of the Court of Appeal should be reversed, and the
respondent's action dismissed ; but as your Lordships' opinions
deal so exhaustively with the grounds of judgment on which
the decision of the case depends, I propose to make only a very
few observations. ,

It may be assumed that Roberts, in the contract he made
with the respondents, intended to buy, and did buy, on the
joint account of himself and the appellants, hoping and expect-
ing that the appellants would, when informed of the terms
of his purchase, ratify or adopt the transaction as on joint
account. The evidence of this is certainly meagre and unsatis-
factory, and involves, as I think, the admission of the entry
made in Roberts's book, to which the appellants were no
parties, and which was not evidence of contract against them.
But at the utmost the respondents can only plead that he has
proved by his own testimony that in buying he did so on the
joint account, in the hope and expectation that the appellants
would adopt or ratify the transaction.

On the other hand, it is clear that Roberts made no sugges-
tion that he was acting for any one but himself, or even that
he had hope or expectation that the appellants would be parties
to the contract. The contract was made avowedly for himself
alone, and not on the statement that he acted on behalf of any
principal, or joint contractor, or proposed joint contractor with
himself. And it is equally clear that he had no authority from
the appellants to make any contract for them, or to make any
contract in which they would be interested, for he agreed to
ay a price which was in excess of that which the appellants
were prepared to give. It is to be further noted that it cannot
be said or suggested that the appellants, by any communica-
tion with the respondents, or by their conduct in relation to
the respondents by any dealing with them, ratified or adopted
their contract with Roberts, so as in a question with them to

249

H. L. (&.)
1901

—o_~
KSIGHLEY,
MaxstEep
& Co.
OP
Dounant.

250

H. L. (E.)
1901

—~
KEIGHLEY,
MaxstTrEp
& Co.

VY
Durant.

Lord Shand.

HOUSE OF LORDS [1901}

entitle the respondents on any such ground to maintain that
the appellants had become liable on contract to them.

The question which arises on this state of the facts is.
whether, where a person who has avowedly made a contract:
for himself (1.) without a suggestion that he is acting to any
extent for another (an undisclosed principal), and (2.) without:
any authority to act for another, can effectually bind a third
party as principal, or as a joint obligant with himself, to the
person with whom he contracted, by the fact that in his'own
mind merely he made a contract in the hope and expectation
that his contract would be ratified or shared by the person as
to whom he entertained that hope and expectation. I am
clearly of opinion, with all respect to the majority of the Court.
of Appeal, that he cannot. The only contract actually made
is by the person himself and for himself, and it seems to me
to be conclusive against the argument for the respondents, that
if their reasoning were sound it would be in his power, on
an averment of what was passing in his own mind, to make
the contract afterwards either one for himself only, as in
fact it was, or one affecting or binding on another as a con-
tracting party, even although he had no authority for this.
The result would be to give one of two contracting parties in
his option, merely from what was passing in his own mind
and not disclosed, the power of saying the contract was his
alone, or a contract in which others were bound with him.
That, I think, he certainly cannot do in any case where he had
no authority, when he made the contract, to bind any one but.
himself.

I have only to add that, for the reasons stated by my noble
and learned friend Lord Robertson, I do not think the Roman
law gives any support to the judgment of the Appeal Court.

Lorp JAMES OF HEREFORD. My Lords, the facts in this
case are not in dispute and I do not purpose referring to them
in detail. The grounds upon which I have arrived at the:
conclusion that the judgment of the Court of Appeal should be:
reversed can be shortly stated.

Roberts, the so-called agent, entered into a contract with

A.C. AND PRIVY COUNCIL.

the Yespondents for the purchase of two quantities of wheat.
When doing so he had no principal—he made the contract for
himself alone. The cause of action in this case is founded
upon the statement made by Roberts, that at the time he made
the contract he had mentally formed the intention to offer to
the appellants the option of ratifying the contract and becoming
parties to it. But no notice of this intention was given to the
respondents: they contracted with Roberts alone, and knew no
one else. They knew of no disclosed principal other than
Roberts, and there was no undisclosed principal—no such
person existed. But the day after Roberts had made the
contract for himself he met the agent for the appellants, who
agreed to share the contract with Roberts.

The question is, Does this latter agreement amount to a
ratification of the contract between Roberts and the respond-
ents? In my judgment, it does not. Common sense and
authority are alike opposed to it.

Doubtless a person can confirm and ratify a contract which
was in fact made on his behalf. But an undisclosed principal
must exist at the time of the contract. He cannot be brought
into life asa principal after the contract has been made without
any recognition of his existence. No doubt a third person, by
agreement with one of the principals, may, as between those
two persons, take an interest in the contract ; but that subsidiary
contract does not create any privity between the third person
and the other principal to the original contract. To establish
that a man's thoughts, unexpressed and unrecorded, can form
the basis of a contract so as to bind other persons and make
them liable on a contract they never made with persons they
never heard of, seems a somewhat difficult task. Hitherto a
man's untold thoughts have been regarded to be of a merely
nominal value, and the offers generally made for them certainly
do not represent large sums of money. If the judgment of the
majority of the Court of Appeal be right, these hidden thoughts
may represent very large sums of money.

An interesting academic discussion took place at the bar for

the purpose of discovering the effect of certain passages to be

found in a portion of the civil law. Whatever the effect of

251.

H. L. (E.)
1901

i Gd
KeEiguiry,
MAxstrep
& Co.

Us
DURANT.

Lord James of
Hereford.

252 HOUSE OF LORDS [1901]

H.L.(E.) these quotations from the Digest may be, they cannot do
1901 more than throw light upon the meaning of doubtful passages
es in our own law, and I cannot discover that there are
ee doubts requiring solution in the law of this country affecting
sae this case. The learned Master of the Rolls has in his judg-
— ment very laboriously and clearly traced the authorities bearing
"Hereford. upon the subject of ratification.

In the case of Sawnderson v. Griffiths (1) Holroyd J. I think
very correctly stated the following proposition: '' It was said,
however, that A. at a subsequent time assented to the agree-
ment, and that such subsequent assent made it his agreement
ab initio. There might have been weight in that argument if
the agent, when he made the agreement, had professed to have
authority to act for A., because then the subsequent ratification
would have been a recognition of the authority which the agent
assumed to have when. he made the agreement. But here A.
never previously authorized the agent to make the agreement
on his behalf, nor is he named as a party for whom the latter
professed to act."

This judgment, delivered more than seventy years ago, has
been followed by many most eminent judges in the cases quoted
by the Master of the Rolls in his judgment, and placed before
your Lordships by counsel at the bar. Fully accepting the
principles laid down by Holroyd J., I concur in the views
already expressed by your Lordships, that they should be
applied to this case, and that, therefore, the judgment of the
majority of the Court of Appeal is erroneous and should be
reversed.

Lorp Davey. My Lords, the facts necessary to raise the
question of law on which the learned judges have differed may
be thus stated: Roberts made a contract in his own name to
purchase a large quantity of wheat from Durant & Co., the
present respondents. Roberts bought on his own account, and
without any authority from the appellants to buy the wheat
on joint account with them, but (it may be assumed for the
purpose of the present judgment) intending that the appellants

(1) (1826) 5 B. & C. 909.

A.C. : AND PRIVY COUNCIL.

should have the benefit of the contract on joint account with
himself, if they chose to accept it, and hoping and expecting
that they would do so. The appellants did afterwards agree
with Roberts to take to the purchase on joint account with him.
Roberts was unable to fulfil his contract, and thereupon the
respondent sued the appellants as undisclosed principals. At
the close of the plaintiffs' case the learned counsel for the
appellants submitted that there was no case, and, after some
argument, Day J. gave judgment for the appellants, holding
that there had been a failure to prove any ratification by them
—meaning, as appears from what he had previously said, that
no ratification was legally possible in the circumstances.

The question of law, therefore, is, whether a contract made
by a man purporting and professing to act on his own behalf
alone, and not on behalf of a principal, but having an undis-
closed intention to give the benefit of the contract to a third
party, can be ratified by that third party, so as to render him
able to sue or liable to be sued on the contract. In the course
of his judgment Collins L.J. says that the point has never been
actually decided, though he admits there are numerous dicta
upon it which have become the foundation of statements in
text-books more or less adverse to the present respondent's
contention, and he says that the question must now be
determined on principle.

The learned Lord Justice does not cite a single judicial state-
ment of the doctrine of ratification, or any single statement of it
by text-writers, which is in favour of his view. So far as autho-
rity is concerned, he is driven to rely upon some words attributed
in the Exchequer Reports to Lord Cranworth (then Rolfe B.)
in Bird v. Brown (1) and a case of Soames v. Spencer. (2)

In Bird v. Brown (1) Lord Cranworth stated the general
doctrine thus: '"'If A. B., unauthorized by me, makes a con-
tract on my behalf with J. 8. which I afterwards recognise
and adopt, there is no difficulty in dealing with it as having
been originally made by my authority. J.S. entered into the
contract on the understanding that he was dealing with me,

(1) 4 Ex. 786; 19 L. J. (NS) — (2) (1822) 1D. & R. 82; 24 BR,
(Ex.) 154. 631.

A.C. 1901. 3 'at

253
H. L. (B)
1901

—am
KWIGHLEY,
MAxstTED
& Co.

Vv
DURANT.

Lord Davey.

254

H. L. (E)
1901

—~
K@IGHLEY,
MAxXsTED
& Co.

Vv
Doranv.

Lord Davey.

HOUSE OF LORDS [1901]

and when I afterwards agree to admit that such was the case,
J. S.is precisely in the condition in which he meant to be."
The statement of the doctrine is, so far, entirely in favour of
the appellants' contention ; but Lord Cranworth is reported to
have added: '' or if he did not believe A. B. to be acting for me,
his condition is not altered by my adoption of the agency, for
he may sue A. B. as principal at his option, and has the same
equities against me if I sue which he would have had against
A.B." These are the words relied on by the Lord Justice.
They are not to be found in the report of the case in the Law
Journal, where the judgment is attributed to Parke B. Lord
Cranworth, if he was the author of these words, or if the
words were really used, may have been thinking of the class of
cases where a person contracts professedly on behalf of a prin-
cipal but without naming him (as was said by Willes J. in
Watson v. Swann (1) and see Lyell v. Kennedy (2)). This
interpretation would satisfy his language, or he may have over-
looked the point now in question ; Ido not know. But what-
ever Lord Cranworth may have said or intended, the words
relied on are not sufficient to raise a doubt in my mind as to the
accuracy of the statement of the law by other learned judges.

The case of Soames v. Spencer (3) may perhaps be explained
on the principle that fraud will not be presumed, and therefore
a man who assumes to sell another person's property really
professes to be acting for the true owner. But, however this
may be, the point now before your Lordships does not appear
to have been raised or argued.

On the other hand, the Master of the Rolls has cited a large
number of cases, extending over a period of seventy years or more,
and containing the opinions of such judges as Lord Wensleydale,
Tindal C.J., Erle C.J., Willes J., and Lord Bowen. These
eminent persons all state the law one way. I refer in parti-
cular to Vere v. Ashby (4); Wilson v. Tumman (5); Watson
v, Swann (1); Falcke v. Scottish Imperial Insurance Co. (6)

(1) (1862) 11 C. B. (N.S.) 756. (4) (1829) 10B. & 0.298; 34B. RB.
(2) (1889) 14 App. Cas. 487, at 408.
p. 456. (5) 6 Man. & G. 236.

(3) 1D. & R. 82; 24 BR. R. 681. (6) (1886) 34 Ch. D. 234.

A.C. AND PRIVY COUNCIL.

I do not think that the propositions of law to be found in
these cases can be brushed aside as mere dicta. Watson v.
Swann (1), for example, was an action upon a policy of
'insurance entered into by one John Smith in his own name.
Erle C.J. says: 'It is clear law that no one can sue upon a
'contract unless it has been made by him, or has been made by
'an agent professing to act for him, and whose act has been
ratified by him. Now, here the contract was not made by the
plaintiff, nor did it purport to be made on his behalf; it pur-
ported to be made by Smith on his own behalf." 'Willes J.
adds: ''It is not necessary that he should be named, but there
must be such a description of him as shall amount to a reason-
able designation of the person intended to be bound by the
contract."

Story on Agency and Kent's Commentaries were also
referred to. Sect. 2514 of the former work contains a very
full statement of the doctrine, and shews that the learned
author understood the law in the same way as the learned
judges already quoted or referred to. I think Mr. Carver
successfully shewed that s. 2514 is in the language of Story
himself. To these authorities should be added the learned
mote of Mr. Serjeant Manning to the case of Walson v.
Tumman. (2)

The weight of authority is therefore against the opinion of
the learned Lords Justices, and I may be permitted to add that
an examination of the cases has confirmed my own previous
impression of what the law is upon the point in question. It
appears from a note in Smith's Leading Cases to Armory
vy. Delamirie (3) that the point now taken was raised in
an unreported case of Matheson v. Kilburn, and that Lord
Cairns and Brett L.J. (Cockburn C.J. dissenting) were of
opinion that a contract made by one on his own behalf, though
intending to buy on behalf of a third person but without
authority from him, was incapable of ratification by that third
person. It is, however, stated that the case went off on the
failure to prove the alleged intention.

(1) 11 C. B. (N.S.)'756. (2) 6 Man. & G. 236, at p. 239.

(3) 2 Sm. L. C. 10th ed. p. 349.
3 T 2

255

H. L. (B.)
1901

a
KriIGHLEy,
Maxstrep

Vv.
DURANT.

Lord Davey.

256

H. L. (E)
1901

—~
K@IGHLEY,
MAxstTep

& Co,
Vv
Durant.

Lord Davey.

HOUSE OF LORDS ~ [1901}

I might content myself with these grounds for my judg-
ment; but Collins L.J. has given reasons for his opinion that:
this case ought to be decided otherwise on principle and (to
use his own expression) common sense, and has also referred
to the Roman law on the subject. I will out of respect to:
him shortly state my views upon this portion of his judgment.
The argument seems to be that as the law permits an undis-
closed principal, on whose behalf a contract has been made, to
sue and be sued on the contract, and as the effect of ratification
is equivalent to a previous mandate, a person who ratifies a
contract intended but not expressed to be made on his behalf
is in the same position as any other undisclosed principal.
Further, it is said that whether the intention of the contractor
be expressed or not, its existence is mere matter of evidence,
and once it is proved the conclusion ought to follow. Romer L.J.
held that on principle it ought to be held that ratification (im
the case before the Court) is possible, and that to hold the
contrary would be to establish an anomaly in the law, and
moreover a useless one. My Lords, I cannot agree. There is
a wide difference between an agency existing at the date of the
contract which is susceptible of proof, and a repudiation of
which by the agent would be fraudulent, and an intention
locked up in the mind of the contractor, which he may either
abandon or act on at his own pleasure, and the ascertainment
of which involves an inquiry into the state of his mind at the
date of the contract. Where the intention to contract on
behalf of another is expressed in the contract, it passes from
the region of speculation into that of fact, and becomes irrevo-
cable. In what sense, it may be asked, does a man contract
for another, when it depends on his own will whether he will
give that other the benefit of the contract or not? In the next:
place, the rule which permits an undisclosed principal to sue
and be sued on a contract to which he is not a party, though
well settled, is itself an anomaly, and to extend it to the
case of a person who accepts the benefit of an undisclosed
intention of a party to the contract would, in my opinion,
be adding another anomaly to the law, and not correcting
an anomaly.

A.C. AND PRIVY COUNCIL.

The passages in the Digest cited by the Lord Justice are from
Dig. III. tit. 5, De negotiis gestis. If the whole of the title be
read, it does not appear to me to bear out the meaning placed
upon it by the Lord Justice, and I can find no warrant for the
gloss put by him on the words me& contemplatione and meo
nomine. I need not, however, pursue this topic, because I
believe that one of your Lordships will discuss it with a fuller
knowledge of Roman law than I can command.

I am therefore of opinion that the appeal should be allowed.

Lorp Brampton (after stating the facts). My Lords, it
was not suggested that in any of the several telegrams in which
the contract was contained, or in any other way, Durant was
made aware, or that Roberts ever hinted to him, that in making
it he was acting by the authority, or on behalf, of an undisclosed
principal. Had he so made it—though at that time no authority
from Keighleys was then in existence—Keighleys might have
ratified and adopted it, and having done so both they and
Durant would have been as responsible upon it, each to the
other, as if Keighleys had been a party to it from the beginning ;
but as this. contract was clearly not so made, but was a simple
written contract between Durant, the vendor, and Roberts,
acting apparently for himself only, as vendee, it could not be
so ratified by Keighleys, for there was no contract open for
them to ratify; and it could not have been adopted by them,
for after a contract has been finally concluded between two
persons it cannot be altered so as to make a third person liable
uponit. If this is desired, it must be done through the medium
of a new contract. .

But it is said for the plaintiff that when Roberts made his
contract he had within his mind an intention, though he never
communicated or disclosed it to anybody, to make it on the
joint account of Keighleys and himself, and that such secret
intention was quite sufficient to empower Keighleys to ratify
or adopt it. I cannot assent to this view. I have always been
under the impression that a concurrence of intention was an
essential element of a contract. Nobody can doubt that it is
essential in making an agreement to ascertain who are then

257.

H. L. (E)
1901

aw
KBIGHLEY,
MaxstTEep
& Co.
v.
DURANT.

Lord Davey.

258

H. L. (E.)
1901

—~
KIcuury,
MaxstrEp
& Co.

Us
DURANT.

Lord Brampton.

HOUSE OF LORDS [1901}

intended to be made parties to it. It is impossible in construing
a contract to give any weight to such a reserved intention as
that suggested in this case; to do so would be to open wide a
doorway to fraud and deception ; and it would necessitate the
addition of the doubtful science of thought-reading to the
requirements of a mercantile education. I reject, therefore,
this doctrine of mental reservation, and strip from the case the:
element of secret intention.

The case then is reduced to this: that there is a contract
between Roberts and Durant simply, to which it was never
avowedly contemplated that Keighleys should be parties.
Neither Keighleys nor Durant could make the former liable by
adoption or ratification of a contract to which, when it was
concluded, it was not in contemplation of themselves or Durant
that they should or could be so. This action, therefore, which
is based on a contract to which Keighleys were not parties,
must fail.

I say nothing about any new contract which it was open for
the parties, or any of them, to have made if they had so thought
fit—a new contract between themselves. It may or may not
be that some contract between Roberts and Keighleys might
have been formulated out of the interview with Wright on
May 12 at Manchester. I am now dealing only with the
contract made on the 11th between Roberts and Durant, to
which, in my opinion, the appellants (Keighleys) could not
make themselves, or be made by Durant, parties.

I will not detain your Lordships by again referring to the
numerous cases cited at the bar, nor to those so fully discussed
by the Court of Appeal; in addition to these, I desire only to
refer to that of Kelner v. Baxter (1), decided by Erle C.J.
and Willes, Byles, and Keating JJ. I agree in the judgment.
of the present Master of the Rolls in the Court of Appeal. It
follows that, with all respect to the opinions expressed by the
majority of that Court, I cannot concur in their views. In my
opinion, therefore, the judgment of the Court of Appeal should
be reversed, the judgment of Day J. restored, uM this appeal
allowed with costs.

(1) (1866) L. R. 2 C. P. 174.

Bia. | AND PRIVY COUNCIL.

Lorp Rosertson. My Lords, after so much has been said
in which I agree, I shall confine my observations to the briefest
statement of my view of the case generally, and a few remarks
on the inferences which have been drawn from certain texts of
the civil law.

With the Master of the Rolls, and in his words, I hold that,
"unless the contract made by the unauthorized agent purports
or professes .. . to have been entered into on behalf of another
.... then that contract made by the unauthorized agent was
not capable of being ratified by a stranger to it." To speak of
the '' purporting or professing" as if this were one condition,
more or less, of ratification, seems to me to be rather an under-
statement. All are agreed that there must be some special
relation between the ratifier and the contract other than and
antecedent to his claiming the contract. To hold otherwise
would be to admit extravagant results. It seems to me that
the whole hypothesis of ratification is, that the ultimate ratifier
is already in appearance the contractor, and that by ratifying
he holds as done for him what already bore, purported or pro-
fessed to be, done for him. There is, as it seems to me, no
room for ratification (unless all the world may ratify) until the
credit of another than the agent has been pledged to the third
party. Whether the unauthorized agent be marked out as an
agent by what he says, or by what he wears, is, of course, a
mere matter of circumstance and of evidence; but an agent he
must be known to be, and as agent he must act. On the other
hand, the only theory consistent with the respondents' argu-
ment is, that the essential condition is that the person making
the contract did so in a state of mind which may more
accurately be described as hope than intention, that the
person who ex hypothesi ultimately " ratifies'? would " ratify."
The difficulty of stating this theory, and the difficulty of work-
ing it, having regard to its basis being unexpressed and very
likely half-formed expectations, are not indeed conclusive
objections, but they challenge scrutiny of supposed origin of
the theory. And this leads me to what Collins L.J. has said
about the civil law.

_ Now it is remarkable that, the question in hand being the

259

H. L. (E.)
1901

—a~

KEIGHLEY,

MAxsTED
& Co.

Vv
DURANT.

260

H. L. (E.)
1901

Gel
KEIGHLEY,
MaxstTEp
& Co.

VY,
DuRANT.

Lord Robertson.

_ HOUSE OF LORDS [1901]

ratification of contracts, nothing that is cited from the civil
law relates to contracts. The passage first and mainly relied
on by Collins L.J. relates to the exaction of a debt by a
negotiorum gestor. Now I agree that in the text importance
is attached to the contemplatio with which the negotiorum
gestor had acted. But, in order to ascertain the relevancy of
this element, it is necessary to grasp the thesis of the long
discussion of which the passage cited is a mere episode. The
question being discussed is, In what cases shall a person inter-
fering in the affairs of an absent man have an action (for
reimbursement or the like) against that man? And one of the
conditions of this purely equitable remedy (allowed by the
liberality of the later Roman law) is that the intervention shall
have been really a friendly intervention in the interest of the
absent dominus, and not a selfish intervention truly in the
interest of the intervener himself or of a third party. In that
question the contemplatio is of essential relevancy, while the
avowal of it is of no relevancy at all except as evidence.
Accordingly, in the case of Seius, the negotiorum gestor has
his remedy because, although it turns out that the true
creditor of the man who was made to pay was someone else
altogether, yet the intervention was motived by regard to the
interest of the other, who made it his own by ratifying, In
this case, as throughout this part of the Digest, the argument
is as to the relations between the negotiorum gestor and the
absentee, not as to the relations between the negotiorum gestor
and the third party, and there is, therefore, no occasion for any
analysis of ratification. In the passage cited, the act ratified
not having been a contract, there is not even (as I view it) an
incidental elucidation of the present controversy; but it is
difficult to suppose that the debtor paid except to a professed
agent of the supposed dominus, and we know that as matter
of practice a negotiorum gestor had to give security ratam rem
dominum habiturum. The other texts from the Digest cited
by Collins L.J. relate to torts, and the juridical considerations
which ought to determine liability or non-liability for a tort
acceded to ex post facto by the person in whose interest it has
been committed are not the same as apply to a man being

A.C. AND PRIVY COUNCIL.

intreduced into a contract with a third party, although the
word ratification and its Latin equivalents may with propriety
be applied to describe his accession in the one case as well as
in the other. But again I must add that I fail to find in any
of those passages any discussion of the question now agitated,
or anything implying that the person injured did not know that
the wrong was done in the service of the person who ultimately
ratifies.

On these grounds I must respectfully decline to hold that
the civil law supports the judgment appealed against.

Lorp Linptzey. My Lords, I do not propose to trouble
the House by stating the facts or by examining in detail the
numerous authorities cited in the course of the argument. I
propose to confine my observations to what appear to me to
be the real difficulties in the case, and to the legal doctrines
involved in it.

So much turns on the position of undisclosed principals that
Z will first say a few words about them.

The explanation of the doctrine that an undisclosed principal
can sue and be sued on a contract made in the name of another
person with his authority is, that the contract is in truth,
although not in form, that of the undisclosed principal himself.
Both the principal and the authority exist when the contract
is made; and the person who makes it for him is only the
dnstrument by which the principal acts. In allowing him to
sue and be sued upon it, effect is given, so far as he is con-
cerned, to what is true in fact, although that truth may not
have been known to the other contracting party.

At the same time, as a contract is constituted by the con-
currence of two or more persons and by their agreement to the
same terms, there is an anomaly in holding one person bound
to another of whom he knows nothing and with whom he did
not, in fact, intend to contract. But middlemen, through
whom contracts are made, are common and useful in business
transactions, and in the great mass of contracts it is a matter
of indifference to either party whether there is an undisclosed
principal or not. If he exists it is, to say the least, extremely

261

H. L, (E.)
1901

—~
KEIGHLEY,
MAxstED
& Co.
v,
DURANT.

Lord Robertson.

262

H. L. (B.)
1901

—\m~
KrIGHLEY,
MAxsTED
& Co.

v
DURANT,

Lord Lindley.

HOUSE OF LORDS [1901}

convenient that he should be able to sue and be sued as a prin-
cipal, and he is only allowed to do so upon terms which exclude
injustice.

The reasons upon which a real principal not disclosed can
sue or be sued on a contract made on his behalf by an agent
acting with his authority have no application to contracts
made by one person for another, but without any authority
from him. Some other reason must be found to permit a
person to sue or be sued upon a contract not entered into by
him through an agent or otherwise.

The principle relied on, and the only principle which by our
law can be invoked with any chance of success, is that known
as ratification, by which an approval of what has been done is.
sometimes treated as equivalent to a previous authority to do
it. The mere statement of the general nature of what is meant.
by ratification shews that it rests on a fiction. "Where a man
acts with an authority conferred upon him, no fiction is intro-
duced; but where a man acts without authority and an autho-
rity is imputed to him a fiction is introduced, and care must be
taken not to treat this fiction as fact.

It is not necessary to write a treatise on the doctrine of
ratification in order to dispose of this case. Historically that
doctrine is no doubt derived from the Roman law; but it has
been extended and developed in this country conformably to.
our own legal principles and to meet our own commercial
necessities ; and it is to our own decisions rather than to the
Digest and commentaries upon it that English Courts must look
for guidance. It is well known that in matters of contract we
pay far less attention judicially to unexpressed intentions than
is paid to them in other countries which have followed the
Roman law more closely than we have: see Byrne v. Van
Tienhoven. (1)

Roberts' evidence, on which the case turns, may be summed.
up by saying that it amounts to one or other of the two follow-
ing statements, namely: (1.) That he intended to buy, and
did buy, as a principal, hoping and expecting that Keighley,
Maxsted & Co. would afterwards join him in his speculation ;

(1) (1880) 5 C. P. D. 344.

A. C. AND PRIVY COUNCIL.

or (2°) That he intended to buy, and did buy, on the joint
account of himself and Keighley, Maxsted & Co. as principals,
hoping and expecting that they would, when informed of what
he had done, ratify the transaction.

The first of these views of his evidence will not avail the
plaintiffs ; for in this view Roberts' contract, not having been
made for Keighley, Maxsted & Co. as possible principals, will
not admit of ratification by them. The plaintiffs' counsel did
not contend that it would, and they did not press the first view
in argument.

The second view is not open to this objection, and ought to
be left to a jury if there is any evidence that Roberts not only
intended to buy, but did buy, on the joint account of himself
and Keighley, Maxsted & Co. He swears that he did; so far
as his intention is concerned, I will give him credit for what
he says, but I am unable to discover any evidence of anything
more.

Had Keighley, Maxsted & Co. authorized Roberts to buy for
them there would have been a contract in fact, although
Durant & Co. did not know of them and did not intend
to sell to them. This is, no doubt, an anomaly, as already
pointed out; but there.is a reality behind it. To apply
the same sort of reasoning to a different state of facts from
which the reality is absent is to go further than any existing
authority, and to extend a fiction further than is required
by those necessities or conveniences of trade which led to
its introduction.

The doctrine of ratification as hitherto applied in this
country to contracts has always, I believe, in fact given effect
in substance to the real intentions of both contracting parties
at the time of the contract, as shewn by their language or
conduct. It has never yet been extended to other cases. The
decision appealed from extends it very materially, and I can
find no warrant or necessity for the extension.

I have examined all the authorities referred to in the
judgments of the Court of Appeal, and those cited by counsel
in this House, and with two apparent exceptions they are all,
in my opinion, adverse to the plaintiffs. One exception is the

263

H. L. (E.)
1901

—m~
KuicHiry,
MaAxstTrep
& Co.

v.
DURANT.

Lord Lindley.

—

264

H. L. (E.)
1901

—~
AKeIGury,
MaxstTEp
& Co,

v
DURANT.

Lord Lindley.

HOUSE OF LORDS [1901]

passage in Bird vy. Brown (1), which has been already com-
mented on, and which I do not clearly understand. The other
apparent exception is Soames v. Spencer (2), which, when
examined, does not really help the plaintiffs. There, one of
two co-owners of oil sold the oil to the defendants. The
buyers—i.e., the defendants—apparently did not know that the
oil did not wholly belong to the seller. When informed that
there was a co-owner who objected to the bargain, the defend-
ants insisted that he was bound by it, and he acquiesced in
their view. Both parties treated the contract. as if made
between both owners, as sellers, and the buyers. Afterwards,
when sued by both co-owners for not accepting the oil, the
defendants—i.e., the buyers—changed their tactics, and con-
tended that there was no ratification, and no contract in
writing, to satisfy the Statute of Frauds. It is plain from the
judgment of Abbott C.J. that the conduct of the defendants
themselves removed any real difficulty as regards ratification
which otherwise might have arisen.

It may be that if one of several co-owners of a chattel sells
it, without the authority of his co-owners, to. a person who
believes he is dealing with the sole owner of the property sold,
the transaction can be ratified by the undisclosed co-owners,
and that they can.then sue or be sued on the contract as undis-
closed principals. Their interest in the property may justify
this view. In Soames v. Spencer (2) it was assumed rather
than decided that ratification in such a case is possible, and I
am far from saying that it is not. The co-ownership shews
that the seller, if acting honestly, must in fact have been
acting for his co-owners as well as for himself. His intention
is supplemented by a fact which completes the proof of what
is necessary. In the present case there is no co-ownership,
which was the foundation of the decision in Soames v. Spencer (2),
and consequently the decision when carefully looked at is not
really an authority for the plaintiffs.

That ratification when it exists is equivalent to a previous
authority is true enough (subject to some exceptions which
need not be referred to). But, before the one expression can be

(1) 4 Ex. 786. (2) 1D. & R. 823 24 RB. R. 681.

A.C. AND PRIVY COUNCIL.

substituted for the other, care must be taken that ratification
is established.

It was strongly contended that there was no reason why the
doctrine of ratification should not apply to undisclosed prin-
cipals in general, and that no one could be injured by it if it
were so applied. I am not convinced of this. But in this case
there is no evidence in existence that, at the time when Roberts
made his contract, he was in fact acting, as distinguished from
intending to act, for the defendants as possible principals, and
the decision appealed from, if affirmed, would introduce a very
dangerous doctrine. It would enable one person to make a
contract between two others by creating a principal and saying
what his own undisclosed intentions were, and these could not
be tested.

To return to the question whether there was any evidence
proper to be left to the jury which would justify a verdict in
favour of the plaintiffs against Keighley, Maxsted & Co., I am
of opinion that there was none. There was no evidence of any
purchase by Roberts for Keighley, Maxsted & Co., as expected
principals, except (1.) what he says of his own intention;
(2.) what he says about the telegram he afterwards sent to
Keighley, Maxsted & Co.; and (3) his own entry in his own
book. Assuming all this to be admissible for any purpose,

what Roberts intended was never disclosed to Durant & Co.,.

and cannot be inferred from the nature of the transaction
itself. Huis intention, therefore, cannot be allowed to affect the

rights of the parties. What he afterwards did, unknown to

Durant & Co., cannot in any way affect their position. The
appeal, therefore, in my opinion, ought to be allowed with
costs here and below.

Order appealed from reversed and judgment of

Day J. restored, with costs here and below.

Lords' Journals, May 20, 1901.