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 The question is whether payment in good faith to an agent relieves a principal of liability to a third party. A majority of jurisdictions recognize the English or older rule that payment by an undisclosed principal without notice is a good defense to any claim asserted by a third party. The majority position was based on some of the leading English cases of the first half of the nineteenth century which were overruled by later English cases. Annot., 71 A.L.R.2d 911, 915 (1960). American courts, while overwhelmingly adopting the Restatement rule that a disclosed or partially disclosed principal is not discharged from liability to a third party by payment to its agent, continued to adhere to the early English view regarding undisclosed principals. 


The modern view, which has been adopted by a minority of states, is expressed in Restatement (Second) of Agency § 208 (1958), which provides: An undisclosed principal is not discharged from liability to the other party to a transaction conducted by an agent by payment to, or settlement of accounts with, the agent, unless he does so in reasonable reliance upon conduct of the other party which is not induced by the agent's ...

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