What defines an undisclosed principal?

An undisclosed principal is characterized by the fact that their identity is unknown to third parties at the time a contract is made. This situation arises when an agent acts on behalf of a principal without disclosing the principal's identity to the third party involved in the transaction. In such cases, the agent is treated as the principal in the eyes of the third party, leading to certain implications regarding liability and rights.

When an agent operates under instructions from an undisclosed principal, they create a unique dynamic where the third party is not aware of the existence of the principal. As a result, the agent is fully liable to the third party for any obligations arising from the contract until the principal is disclosed. Once the principal's identity is revealed, the principal can be held liable for the contract, potentially offering the third party additional remedies.

Other options do not accurately capture the essence of an undisclosed principal. For instance, a principal whose identity is known to the public indicates a different kind of principal entirely, one that operates openly. A principal whose identity the agent reveals to all parties would not be considered undisclosed, as the very nature of being undisclosed is rooted in the lack of identity revelation. Finally, the existence of powers of attorney pertains more to the delegation