Undisclosed Principal And Agent - A Useful Reminder Of The Law

Novasen S.A. v. Alimenta S.A. [2011] EWHC 49 (Comm)

Background facts

Novasen (the Seller) was a trading company based in Senegal. Alimenta (the Buyer) was a company based in Switzerland trading in groundnut and other vegetable oils. Alimenta had previously purchased products from Novasen. The parties dealt directly and not through brokers.

In September 2007, Novasen contracted to sell to Sogescol (another trader in vegetable oils) 2,000 MT of groundnut oil on FOSFA 201 terms. The price was $1,620/MT CIF Brussels with payment to be made in cash against documents (CAD). The contract also stated that "as per our agreement we have provided that Sogescol will be able to receive a brokers fee of 0.5% on this contract". Although Novasen agreed these terms, it subsequently requested that the commission should be deleted and the price changed to US$1,612/MT. Sogescol agreed.

Meanwhile, Alimenta and Sogescol entered into a short form contract, also on FOSFA 201 terms, for the same quality and quantity of groundnut oil, with Novasen as the seller and Alimenta as the buyer. Sogescol was referred to as the "Agent acting for Buyers' Account". The sale price was $1,620/MT and the CAD payment was to be made in Geneva, not Brussels. "Other conditions" included "special conditions: the buying agent, Sogescol, is discharged by buyers [Alimenta] of any costs and consequences resulting from a failure of shippers/sellers [Novasen] in the execution of this contract, particularly short shipped weight, quality and late delivery." At all material times, Novasen was not aware of the contract between Alimenta and Sogescol.

In the event, Novasen did not perform the contract and no goods were shipped. Alimenta initially commenced FOSFA arbitration proceedings against both Sogescol and Novasen for breach of contract but subsequently withdrew its case against Sogescol.

FOSFA arbitration

In the arbitration between Alimenta and Novasen, Alimenta argued that Sogescol had acted as its buying agent and, on this basis, the arbitrators were asked to disregard Sogescol's responsibility. In response, Novasen denied Alimenta's entitlement to intervene in any contract concluded between Novasen and Sogescol.

The umpire found that Alimenta had established that it was the undisclosed principal of Sogescol and was therefore a party to the contract with Novasen. It followed that, in order to rely on any exception to the general rule on undisclosed principals, it was for Novasen to show...