| Abstract: | Various issues in the common law arise when agents make contractson behalf of principals. Should a principal be bound when hisagent makes a contract on his behalf that he would immediatelywish to disavow? The tradeoffs resemble those in tort, so theleast-cost avoider principle is useful for deciding which agreementsare binding and can unify a number of different doctrines inagency law. In particular, an efficiency explanation can befound for the undisclosed-principal rule, under which the agent'sagreement binds the principal even when the third party withwhom the contract is made is unaware that the agent is actingas an agent. |
