Set-Off and Agency

Abstract

The purpose of this article is to examine when a right to set off independent cross demands may be available in a case in which an agent acting on behalf of a principal has contracted with a third party. Three particular situations are considered. The first involves the series of cases dealing with undisclosed principals, in which the third party was not aware at the time of the contract that the person with whom he was dealing was merely acting as an agent on behalf of another. The principal subsequently sues the third party on the contract, and the question is whether the third party may bring into account a debt owing to him by the agent on a separate and independent transaction. The second situation arises when the agent, rather than the principal, is the person in whose name the action against the third party is being prosecuted. The third party may wish to set off in that action a debt owing to him by either the principal or the agent on another transaction. Finally, the question of a right to set off independent cross demands may arise in an action brought by the third party against the agent.