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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 22, 2020

Undisclosed Principal May Sue on a Contract Made in its Agent’s Name

On September 8, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Artemus USA LLC v. Leila Taghinia-Milani Inc., 2020 NY Slip Op. 32958(U), holding that an undisclosed principal may sue on a contract made in its agent’s name, explaining:

The Defendants argue that all claims asserted on behalf of Artemus must be dismissed because Artemus has no standing to sue under the Agreement as either a party, third-party beneficiary, or agent of Edelman. In their opposition papers, the Plaintiffs argue that Artemus has standing to sue because it is the owner of the artwork that is the subject of the Agreement. The court agrees. Although the Agreement refers to Edelman as the sole consignor and does not mention Artemus, it is significant that the Agreement does not contain any representation that the consignor owned the artwork. The Agreement simply provided that the artwork was to “remain the sole property of the Consignor” and that damages would “be paid to Consignor” in the event that the artwork was damaged.

A nonparty to a contract must suffer direct harm flowing from the contract or be a third-party beneficiary to have the requisite standing to challenge a contract. Here, the Plaintiffs have sufficiently alleged that Artemus was the owner of the damaged artwork and suffered certain damages due to breach of the Agreement.

It is also well settled that an undisclosed principal may sue on a contract made in its agent’s name. As the Plaintiffs assert that a principal-agent relationship existed between Artemus and Edelman, and that Edelman was in sum and substance to collect a commission while Artemus retained ownership of the artwork, the Plaintiffs’ sufficiently allege that Artemus is a proper party to this action as an undisclosed principal. Accordingly, the Defendants’ motion to dismiss is denied.

(Internal quotations and citations omitted).

Standing, in simple terms, means being the right person (or among the right persons) to seek relief from a court. Usually, it turns on the question of who was harmed. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding who the right person is to bring a lawsuit.

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