Hirsch v. Silberstein - 424 Pa. 486, 227 A.2d 638 (1967)

Rule:

A person with whom an agent contracts on account of an undisclosed principal can rescind the contract if he was induced to enter into it by a representation that the agent was not acting for a principal and if, as the agent or principal had notice, he would not have dealt with the principal.

Facts:

This is an appeal from a decree of the court below dismissing the Hirschs’ complaint in equity in which they sought to set aside by rescission or cancellation two deeds to a property originally owned by them. The property in question is a one-acre lot adjoining the Hirschs’ home in Newtown Township, Delaware County. On April 14, 1965, the Hirschs and vendee husband Silberstein executed a written agreement of sale whereby Silberstein agreed to purchase the lot in question for $10,000. On May 25, 1965, settlement was held and the Hirschs conveyed the property to the Silbersteins by deed. On the same date, Silberstein conveyed the same parcel of ground to the Cross, who are Negroes. In connection with the latter conveyance, husband Silberstein executed an affidavit averring that he had been acting as a straw party for the Cross, and the transaction was, therefore, exempt from the real estate transfer tax. The Hirschs argue that appellee Silberstein transferred or assigned the agreement of sale in violation of a clause in the agreement which provides: "This agreement shall not be assigned or transferred by the Buyer without the written consent of the Seller being first had and obtained. Subject to the said provision regarding assignment by Buyer, this agreement shall extend to and bind the heirs, executors, administrators and assigns of the respective parties hereto."

Issue:

Was the prohibition against assignment of the agreement violated when Silberstein conveyed the same parcel of ground to appellees Cross?

Answer:

No.

Conclusion:

The court affirmed the trial court's judgment. The court held that the prohibition against assignment of the agreement was not violated because the agreement was not assigned or transferred. The Silbersteins conveyed the land, not the agreement, to the Cross. The court also held that the Hirschs could not prevail on their claim of fraud because the vendees were under no duty to reveal the existence of their undisclosed principals, and the Hirschs suffered no damages recognizable at law or in equity as the result of any claimed fraud. The Hirschs made no claim that the selling price was inadequate.