PRINCIPAL AND AGENT
39. In General. Agency is the term applied to the legal relation existing between persons who transact business or perform duties through representatives. Few duties are performed, and few business transactions are completed solely through the personal efforts of the interested parties. Most business dealings are completed in part, at least, by representatives or agents. Much important business is transacted by corporations. Corporations must act through agents. They have no identity apart from officers and agents. Individuals, as well as the smaller business concerns, perform many of their duties and make many of their contracts through representatives or agents. The law relating to agency, next to the law of contracts is probably the broadest as well as the most important branch of commercial law. Its application is almost universal. A distinction is sometimes drawn between representatives appointed to make contracts with third persons, and representatives appointed to perform menial or mechanical work, by calling the one class, agents, and the other servants. There is little reason for any such distinction. The same rules of law apply to both agents and servants. The principal distinction is in the nature of the service, which need not be considered in discussing the general legal principles.
The party appointing another to represent him in his relation to third persons is called the principal. The person appointed to act as a representative is called the agent. The legal relationship existing between the principal and the agent, and the principal, agent and third person, constitutes the law of agency. If a dry goods merchant, A, employs B, a traveling salesman, to sell his goods, and B sells goods to C, A is the principal, B the agent, and C, the third person contracting with A, through A's agent B.
40. Who May be a Principal. A principal is one who appoints an agent. A, employs B to deliver goods; A is principal and B agent. Any person, natural or otherwise, competent to enter into a contract, may enter into a contract through an agent. There is one possible exception to this rule. It is a well recognized rule of law that an infant cannot appoint an agent. An infant may enter into a contract which is not void at law, but which is merely voidable. (See subject, "Infant" in Chapter on Contracts.) That is, an infant may lawfully make and carry out a contract. The law does not prohibit it. But the law will not compel an infant to carry out his contracts, except for necessaries. When it comes to the appointment of an agent, however, the law refuses to give an infant this power. By an infant is meant a person under legal age.
Any person of legal capacity may appoint an agent. In other words, a person may do through an agent the things he, himself, may do. An insane person, an idiot or a drunken person cannot appoint an agent. A corporation may do business through agents, limited only by its corporate capacity. A partnership may do business through agents, limited only by the purposes for which the partnership is formed.
41. Who May be an Agent. Any one, except a very young child and persons whose interests are opposed to those of the principal, may act as agent. A child may be employed to deliver goods, and thus make and complete contracts for his principal. Persons of unsound mind may serve as agents. Persons who cannot act as principal, through lack of capacity to contract, may act as agent for others. For example, A, fourteen years old, cannot be bound by a contract with B for the purchase of one hundred bushels of wheat, but A may be employed as agent by C, a competent person, to purchase of B one hundred bushels of wheat.
A person whose interests are opposed to those of his principal is disqualified from acting as agent. That is, a person cannot be agent for both parties to the same transaction. For example, if A is employed as traveling salesman by B to sell goods, he cannot serve as agent for C in the purchase of goods from B without the knowledge and consent of both B and C.
Artificial persons, such as partnerships and corporations, may act as agents. It is usually held that children under seven years of age cannot act as agents, by reason of tender age.
42. How Agents May be Appointed. Agents may be appointed by any act of the principal which shows that it is the principal's will that the agent shall act as the principal's representative.
Agents may be appointed by oral statement, by written document, by conduct on the part of the principal, or by ratification of an unauthorized act.
Most agencies are created by oral authority. Any word by which the will of the principal is manifested is sufficient. A tells B to order a barrel of flour from C. This constitutes B an agent for A. B's asking A if he shall order a barrel of flour from C, to which A nods, constitutes B, A's agent. A writes to B and requests him to order a carload of flour from C. This constitutes B, A's agent. B, without any authority from A, orders a car load of flour from C, which A accepts, and for which he promises to pay. This constitutes B, A's agent by ratification.
Some few contracts of agency must be in writing. A employs B to act as his salesman for a period of two years. As between A and B, the contract is not enforceable, by reason of the Statute of Frauds (see Statute of Frauds, chapter on Contracts). But as between A and third parties dealt with by B as agent, A cannot refute the agency.
Some contracts which must be made in writing, such as land contracts require the agent's authority to be in writing.
If a person knowingly permits another to act as his agent, he cannot afterwards repudiate the agency. For example, A stands by and watches B sell A's horse to C. Although B had no authority to make the sale, A, by his conduct, cannot claim there was no agency.
An agent's assertion of agency does not of itself constitute an agency. If A, without B's knowledge, claims to C to have authority to sell B's horse and does attempt the sale, title to the horse does not pass to C, because A had no authority to make the sale. A mere declaration of authority on the part of the agent without the knowledge or consent of the principal does not create an agency.
43. Purposes for Which an Agency May be Created. With the exception of fulfilling contracts for personal services, a person may do, through an agent, anything he may lawfully do by himself. For example, A employs B, an artist of fame, to paint a picture. Manifestly B cannot employ a student or another artist to paint the picture. A contracted for B's personal skill and work, and cannot be made to accept the work of another. In the majority of business transactions, however, the personal element does not enter. The thing to be done, or the article to be furnished, is the feature of most contracts. By whom the thing is done, or by whom the article is furnished, does not matter. For example, A purchases one hundred bushels of wheat from B. B delivers the wheat through his agent. Ordinarily A cannot, nor does he wish to complain. A contracts with B to have B furnish him an oak chair of given dimensions. B employs C to make and deliver the chair. A cannot complain so long as the chair corresponds to the terms of the contract.
A party cannot do through another what he himself cannot lawfully do. For example, a party cannot employ an agent to purchase votes for him. Neither can a person lawfully corrupt legislators by means of an agent, nor lawfully commit a crime by means of an agent.
44. Ratification of Agency. Where a person assumes to act as an agent for another without authority, or in performing an agency, exceeds his authority, he does not bind the person for whom he assumes to act, unless such person subsequently, with knowledge of the fact, consents to be bound thereby. Such assent is known in law as ratification.
A person cannot ratify an act which he, himself, has no power to perform. For example, A, pretending to act for B, offers C, a legislator, one hundred dollars ($100.00) to vote against a certain measure. B cannot ratify this act, since he himself cannot lawfully perform it. If however, A, knowing that B desires a certain rare picture, finds it and orders it in B's name, B may ratify the act by accepting and paying for the picture.
MAIN READING ROOM, U.S. CONGRESSIONAL LIBRARY, WASHINGTON, D. C..
In Center of Central Circular Desk, is the Housing for the Book-Handling Machinery. Card Catalogue in Foreground. View Facing Entrance. The Corinthian Order has been Used.
Much discussion has arisen as to the ability of a person to ratify a forgery of a negotiable instrument. The courts differ on this question. It is, however settled that in case of a forgery, if the alleged principal fails to deny the signature when the paper is presented to him, or by remaining silent, induces another to purchase it, or to injure his position by reason thereof, the alleged principal is estopped from further denying the authenticity of the signature, and may be compelled to pay the instrument. For example, A forges B's name to a promissory note payable to C. C presents the note to B for payment. B may refuse to pay the note by reason of forgery. If, however, A forges B's name to a note, payable to C, and D shows B the note, saying that he is about to purchase it if it is genuine, and B remains silent and permits D to buy the note, B's silence amounts to a ratification of the forgery and he must pay the note to D.
When an alleged principal's attention is called to the fact that an alleged agent has assumed to act as his agent, he must choose between repudiating the act and accepting it. This choice is known in law as the principal's right of election.
45. Classification of Agents. Agents are usually classified as universal, general or special. By universal agent is meant an agent empowered to represent his principal in every capacity. A principal could have only one universal agent. In business affairs, a universal agency is seldom, if ever, found. It is useful, however, as a classification to show the different kinds of agents, depending upon the degree of their authority.
A general agent is one authorized to perform all the duties of his principal of a certain kind. A, an insurance company, appoints B its sole agent to solicit insurance in the city of Boston. B is a general agent for the purpose of soliciting insurance in the city of Boston. General agencies are common in business practice.
A special agent is one authorized to act for his principal in a particular matter or transaction. For example, A employs B, an attorney, to try a certain law suit. B is a special agent.
In practice it is not always easy to determine whether an agent is a general or a special one. A principal does not always limit his agent's powers by actual authority conferred upon the agent. His intention and his instructions to the agent may limit the latter's authority, but third persons may rely upon the apparent authority of the agent, rather than the actual. For example, A employs B as a traveling salesman to sell dry goods. He instructs B not to sell any bills less than five hundred dollars ($500.00) in amount. B sells C a bill amounting to four hundred dollars ($400.00), C does not know of the limitation of B's authority. A is bound by B's sales to C. C has the right to rely upon B's apparent authority. A has given B actual authority to sell goods, and this authority carries with it the implied or apparent authority to sell in any reasonable amounts.
Actual authority to do certain things carries with it the right to do those things which impliedly, or from custom or usage apparently accompany the authority conferred.
Third persons dealing with an agent must, on the other hand, ascertain at their peril that an agent has the authority claimed. For example, if A, without authority, claims to be agent for B, and sells an order of goods to C, and collects from C a certain amount, when in fact he is not the agent of B, C has no contract with B. A third person dealing with an agent must ascertain at his peril, that the alleged agent has authority from his principal to act as agent in a certain capacity. When this is ascertained, the third person has a right to treat the agent as having the authority to do all the things necessarily or customarily belonging to his agency.
46. Duties of Principal to Agent. The relation of a principal to his agent arises out of a contract, express or implied. The contract may expressly provide that the agent is to receive a specified sum for his services. In this event, the principal is legally liable to pay this amount to his agent. The principal may have a defense to his contract, the same as to any contract. But if the agent has performed his contract of agency, he can enforce payment therefor. For example, A employs B to sell furniture for a compensation of one hundred dollars ($100.00) per month and expenses, the contract to cover a period of twelve months. When B performs this service, he may, by legal action, compel B to pay him one thousand two hundred dollars ($1,200.00). If B fails to work for A as provided for by the terms of the contract, and at the expiration of six months enters C's employ, in most jurisdictions, he can recover nothing from A, since he has not fulfilled his contract. In some jurisdictions, he may recover from A the value of his services, less the damages A has suffered by reason of breach of contract.
Many agencies are created without any express provision as to compensation. In this event, a contract relation exists, as much as in the former case. There is an implied contract that the agent shall receive a reasonable compensation for his services. For example, A, a contractor, requests B, a teamster, to haul stone for the construction of a bridge. B works for A a week, nothing having been said as to compensation. B can recover from A the reasonable and customary value of his services.
There is also a duty on the part of the principal to protect his agent against unnecessary risks of injury. There is a duty on the part of a master to protect his servant. An agent or servant assumes the risks which naturally belong to the kind of work in which he is engaged. For example, A employs B to work in a saw mill. B assumes the risks incident to the employment. If a log accidentally rolls on him, A is not liable in damages, or if B carelessly cuts his hand on the saw, A is not responsible. But if the boiler explodes through carelessness of A, or if the saw flies to pieces on account of wear, and injures B, A is liable.
It is said that a principal or master is obliged to furnish his agent or servant with a reasonably safe place in which to work, and with reasonably safe tools and instruments with which to work. If the principal negligently fails to these things, and the servant is injured without negligence and carelessness on his part, the principal is liable to him in damages for any injuries.
47. Duties and Liabilities of Principal to Third Persons. When a person employs another to act for him, he is liable to third persons for the acts performed by the agent, so long as the agent acts within his authority. If A appoints B his agent to purchase live stock, A must pay third persons for the live stock purchased in his name by B. A person employing another to act as his agent is responsible to third persons for acts performed by the agent, which are within the apparent authority of the agent, as well as for the acts which are within the actual authority. If A appoints B his agent to purchase live stock and instructs him to purchase only hogs, but limits his authority to pay over five cents per pound, and B purchases at five and a half cents from C, who does not know of this limitation, A is bound by the contract. In giving an agent authority to do certain things, the agency carries with it the customary or implied authority to perform those acts incident to the general character of the agency. Thus, authority to purchase usually carries with it authority to fix the price. This is especially true of authority to sell.
Notice to an agent is notice to a principal. If an agent is authorized to sell goods, and in making a sale, is notified by the purchaser that the goods are purchased conditionally, in the absence of any special instruction limiting the power of the agent to sell conditionally, brought to the attention of the purchaser, the principal will be bound by the condition.
A principal is liable to third persons for his agent's torts or wrongful acts. If A directs his agent B to destroy C's property, A is liable to C for the damage done. A principal is not only liable to third persons for the damages done under his express direction by his agent, but he is also liable for the acts carelessly done by the agent in the course of his employment. A street car company employs B as motorman. B, carelessly and negligently, while operating a car runs over C. A is liable for B's negligent act. A principal, however, is not liable for the wrongful acts of his agent, performed outside of his employment. A, a street car company, employs B as conductor; C, standing on the street insults B. B stops his car, gets off and assaults and injures C. A is not liable, since B did not commit the act complained of while in the course of his employment, but went outside the course of his employment and acted on his own behalf.
48. Duties and Liabilities of Agent to Principal. An agent must obey the instructions of his principal. If he disobeys his instructions, he is liable to his principal for losses sustained. For example, if A employs B to sell flour at four dollars ($4.00) per barrel and B sells one hundred barrels at three dollars and seventy-five cents ($3.75), he must respond in damages to A for twenty-five cents a barrel. If, however, a discretion is given the agent, and he makes a reasonable mistake in using his discretion, he is not liable. If his instructions are not clear, and he carries out what he thinks are his instructions, which prove not to be the desire or intention of his principal, he is not liable.
An agent must account to his principal for money collected, and for moneys or property coming into his possession by reason of his agency. If he deposits money in his own name and it is lost through a bank failure, he is responsible to his principal. If he carefully deposits it in the name of his principal and the bank fails, he is not responsible.
An agent must act carefully in the performance of his principal's work, or as it is usually said, he must not act carelessly or negligently. He must act as a reasonably prudent man would act, under similar circumstances, or be liable to his principal in damages.
An agent must be loyal to his principal's interests. He cannot act secretly for another. He cannot act secretly as agent for both parties to a transaction. If he makes profits in his agency dealings, he must account for them to his principal. A employs B to sell Christmas novelties. B, shortly before Christmas receives a large order from C, who offers B one hundred dollars ($100.00) in excess of the regular price, if the goods arrive the following day. B succeeds in having the goods reach C the following day. B must account for the extra one hundred dollars ($100.00) to A, his principal.
An agent must faithfully carry out his agency. He is responsible for failure to act loyally. A employs B to sell butter. B obtains an offer from C, a rival butter manufacturer, to commence work for him on commission two weeks hence. B tells his customers not to purchase for two weeks, at which time he can make them a better price. B is liable to A in damages for this act of disloyalty. He has broken his contract.
An agent, who is employed to perform personal services, cannot transfer his responsibility or agency to another.
One who agrees to act as agent for another without compensation, cannot be forced to fulfil his agency. He is not liable in damages to his principal for failure to act, but if he chooses to act without compensation, he is liable if he acts with great negligence. If A requests B to drive his horse home and B drives the horse and leaves him without tying him, and the horse runs away and destroys the carriage and ruins himself, B is liable for gross negligence.
49. Rights and Liabilities of Agent to Third Persons. An agent acting within the scope of his authority, in making contracts with third persons, binds his principal by the contract, but does not bind himself. A is authorized by B to purchase a horse. A purchases a horse from C, notifying C that he is purchasing as agent for B. C must look to B for the purchase price, since A acted solely as agent and is not personally liable under the contract.
If an agent, intending to act as agent, makes a contract in his own name, without informing the third party with whom he is dealing, of the agency, he binds himself. Under these circumstances, he usually binds his principal also. This question is discussed more at length under the title "Undisclosed Principal." If A is employed by B to purchase a horse, and A purchases a horse from C for two hundred dollars ($200.00), without telling C of the agency, the purchase price to be paid the following day, A binds himself personally to pay C the two hundred dollars ($200.00) and C is not obliged to look to B for payment.
If an agent, honestly believing he has authority to act as agent when he has not, makes a contract as agent for his supposed principal, he binds himself personally and not his principal. A writes to B, "Purchase for me C's bay team, if same can be secured for two hundred and fifty dollars ($250.00), half payable in six months." B reads the letter and purchases the team in the name of A for two hundred and fifty dollars cash ($250.00), overlooking the condition in A's letter that half was to be paid in six months. B binds himself to C and does not bind A.
When an agent falsely or fraudulently represents himself as agent, he binds himself and not his alleged principal.
If an agent, honestly believing he has authority to act, does not have such authority, but discloses all the facts connected with his authority, to the third person with whom he is dealing, he is not personally bound. A, having previously acted as agent for B, in purchasing onions by the crate, receives the following wire from B, "Purchase one hundred crates, ship at once." A, supposing this refers to the purchase of onions, shows the telegram to C, and tells him that in the only other transaction in which he acted for B he purchased onions, and that he supposes this wire refers to onions. He purchases one hundred crates of onions from C, and later discovers that B intended turnips, instead of onions. A is not bound personally. He has acted honestly and revealed all the facts in his possession to C, who must act at his risk as to A's actual authority.
50. Undisclosed Principal. A principal, whose agent deals with a third person for his benefit, without disclosing the name of his principal, or perhaps without disclosing the fact of agency, is said to be an undisclosed principal. For example, A employs B to purchase one hundred crates of oranges. B purchases the oranges from C for A in his own name, not telling C that the purchase is made for A. In this case, A is an undisclosed principal.
As a general rule an undisclosed principal, when discovered, is liable upon the contract of his agent.
In case of an undisclosed principal, the agent is liable personally as well as the undisclosed principal. If A instructs B to purchase for him five cars of coal, and B purchases the coal of C in his own name, without disclosing the fact of his agency, B is personally liable to C for the purchase price.
The undisclosed principal is not liable to a third party if the third party with full knowledge of the agency, elects to hold the agent. If A employs B to purchase goods for him, and B purchases the goods in his own name from C, and C, before payment, learning that the goods were purchased for A, elects to hold the agent B, by suing him for the purchase price, or by doing or saying anything that shows his determination to hold the agent, rather than the principal, he cannot thereafter hold A.
The undisclosed principal may enforce against third persons the contract of his agent. If A employs B to purchase goods from C and B makes the purchase in his own name for future delivery, A may compel C to deliver the goods to him. This rule applies in all cases where the third party is not injured by its application.
The liability of an undisclosed principal to third persons, upon contracts made by an agent in the agent's name, is subject to the further exception, that when the third party has led the undisclosed principal to believe that he is looking to the agent alone for fulfillment of the contract, and relying upon such conduct the undisclosed principal settles with the agent, he is no longer liable to the third party. In this event the third person is said to be estopped from the right to sue the undisclosed principal. This rule is based upon equitable reasons. There can be no such thing as undisclosed principal in case of a negotiable instrument. No one is liable on a negotiable instrument, such as a note, draft, or check, except the maker, indorser, drawer or acceptor.
51. Apparent Authority of Agent. While it is true that an agent must have authority from his principal, before he can bind his principal in the capacity of agent, and while it is equally true that third persons, in dealing with agents, must determine at their peril that the agent has actually received authority to act for his principal, a third party has the right to rely upon the implied and customary powers accompanying an actual authority conferred upon an agent. Few contracts are made express in all their terms. Language is not susceptible of such nicety. In the express or implied contracts used in creating agencies, many things are implied. A third person dealing with an agent, is not limited by the actual authority conferred upon the agent by his principal, if the character of the authority apparently confers other customary or implied powers. Third persons are said to have the right to rely upon the apparent rather than upon the actual authority of the agent. This does not mean that an agent can create an agency and bind his principal without having received any authority from his principal to act as agent, but means that where an authority of a certain character has been conferred upon an agent, third parties dealing with the agent, have a right to rely upon the apparent or customary powers conferred, rather than upon any secret or unexpected limitations upon such authority. For example, an agent has authority to sell silk goods and to make exchanges in silk. This authority is printed on the order sheets furnished the agent. The agent exhibits these order sheets to the customer and exchanges are made. The principal cannot claim that the agent had authority to exchange only goods of the principal's manufacture. The authority conferred upon the agent to make exchanges, apparently was to make exchanges of any silks. The principal cannot complain if third parties rely upon the apparent authority.
52. Secret Instructions. So long as the agency is legal, a principal may create an agency of as limited an extent, or of as broad a nature as he desires. So long as the limitations which the principal places upon his agent's authority are not of a nature to mislead third persons, the agent cannot bind his principal by exceeding these limitations. But if a principal confers an authority upon an agent which impliedly embraces a number of powers, the principal cannot limit these powers by secret instructions. The limitations upon an agent's apparent authority must be brought to the attention of the third party. For example, A, a wholesale dry goods dealer, may employ B, a salesman, to take written orders only. If B attempts to take oral orders, the principal, A, will not be bound thereby. But if A gives B authority to take written orders only, and secretly instructs B to take no order less than fifty dollars ($50.00) in amount, or in excess of two thousand dollars ($2,000.00), and B takes C's order for forty-five dollars ($45.00), C not knowing of this limitation, A is bound. If, however, A instructs B to take only written orders, and in amounts ranging only from fifty dollars ($50.00) to two thousand dollars ($2,000.00), and prints these conditions plainly upon the order blank, C, in signing one of these order blanks for forty-five dollars ($45.00), does not bind A. In this case, A has placed the limitation of B's authority in C's possession.
53. Wrongful Acts of Agent. An agent is personally responsible for wrongful acts committed. The fact that he acts in a representative capacity, does not excuse him from committing wrongs, nor does it relieve him from personal liability therefor. The principal, as well as the agent, is liable for the wrong committed, if authorized. If A instructs his agent, B, to sell goods by fraudulent representations and B, by means of said fraud, sells goods to C, B personally, as well as A is liable to C, for the wrongful act. In the language of the courts, an agent is liable to third parties for malfeasance, but not for misfeasance. That is, an agent is liable to a third party for wrongful acts done, but is not liable to third parties for mere failure to observe the terms of his agency. In the latter case, he is liable to his principal only.
54. Delegation of Authority and Subagents. Where personal judgment and discretion are required of an agent, he cannot transfer his duties to another, without the consent of his principal. A, a wholesale dry goods merchant, employs B, an experienced traveling salesman, to sell goods. B, by his contract, is bound to give his personal skill to A and cannot employ C to act as salesman for him. A presumptively employs B to use his own skill and judgment. B is not permitted to delegate his authority to another.
Where, however, mere mechanical or ministerial work is to be performed the agent is permitted to employ others to assist him, or to perform the work. For example, A employs B, an expressman, to carry his trunk to the depot. B may employ a boy to assist him in performing the work, or may employ another to perform the work. Usage and custom have much to do in determining whether or not an agent is permitted to delegate his authority. The performance of a mere ministerial duty may be delegated. A employs B to act as stenographer in reporting the trial of a case. When it comes to writing out the testimony, B may perform the task himself, or delegate it to another.
When an agent employs a subordinate, or delegates his authority to another on his own responsibility, the agent stands as principal for the sub-agent, and the original principal is not responsible to third persons for the acts of the sub-agent. If, however, the agent is authorized by the principal to appoint a sub-agent, the agent is bound only to exercise care in the selection of such sub-agent, and the original principal is liable to third persons for his acts. The sub-agent is answerable to the principal, and not to the agent for his acts. For example, A, a florist, employs B to deliver a box of flowers. B employs C. The nature of the duty is such that B may delegate it. But if C is negligent in the performance of the work, B is liable to A for the negligence, for the reason that A did not expressly or impliedly direct B to employ another.
A, in Chicago, deposits for collection, a check drawn on a New York bank. A knows that it is the custom of bankers to employ other banks for the purpose of making collections. If the Chicago bank uses due care in selecting another bank to assist in making the collection, and this bank makes the collection and fails before the Chicago bank receives the money, A must stand the loss, and not the Chicago bank. A authorized the employment of a sub-agent. There is some conflict of authority on the legal question involved in the above example.
55. Agent's Authority to Collect. An agent authorized to solicit orders is not thereby authorized to make collections on such orders. If, however, the agent is entrusted with the goods, and delivers them at the time the sale is made, he is authorized to receive payment therefor.
An agent authorized to sell, is not authorized to exchange or trade goods. He is authorized to make sales for cash only. If he accepts checks, or sells on credit, he is personally liable for losses. There is a tendency at present to permit the agent to accept checks in payment. The custom of making payment by check is so well recognized in many lines of business, that in some transactions it impliedly gives an agent this authority. This was not formerly the rule, and is still disputed by many courts.
56. Agent's Signature to Written Instruments. The proper method for an agent to employ in signing a written instrument, as agent, is to describe himself as agent for his principal in the body of the instrument, and then sign his principal's name at the end thereof, by himself as agent. For example, if A, is agent for B in making a contract of sale, the body of the instrument should state that "B by A, his agent, agrees," and the signature should be
(B..............)
(by A, his agent)
If the contract is merely signed "A, agent," the agent probably binds himself only. This is especially true in case of sealed instruments, such as deeds. In case of promissory notes, an agent who has authority to make such instruments, may make them in the name of his principal without using his own name at all. The more common form, however, is to sign the principal's name, per the agent as agent, or to sign the agent's name as agent for the principal, giving the principal's name. The mere signing of the agent's name as agent is a mere description, and probably binds the agent and not the principal. For example, if A is agent and B the principal, a promissory note executed by the agent should be signed
(B..............)
(by A, his agent)
A simple contract should state in the the body of the instrument that A, as agent for B, is making the contract, and the contract should be signed
(B..............)
(by A, his agent)
or A, agent for B. A promissory note or simple contract made and signed in the name of the principal, the agent's name not appearing, is probably binding, but it is not good business practice. The exact condition of affairs should be shown, and the name of the agent, as well as that of the principal, should appear in the document.
57. Authority of Agent to Warrant. As to whether or not an agent authorized to sell personal property has implied authority to warrant its quality, is not uniformly settled. If there is any rule on the question, it probably is controlled by usage and custom. If there is a general well known custom to warrant a particular article, the agent has implied authority to warrant the quality of the article sold. If no such usage or custom exists, or if the usage or custom is purely local and not general in its application, the agent has no authority to warrant the quality of the goods sold. It must be remembered that a principal is bound by the general character of authority he confers upon his agent, by the agent's apparent authority rather than by the actual authority, unless the latter is actually brought to the notice of third parties. It has been held that an agent authorized to sell a horse is authorized to warrant the soundness of the horse, and that an agent authorized to sell reapers is authorized to warrant their durability and fitness. It was held that a principal, who authorized an agent to sell goods at a certain price, did not authorize the agent to warrant to third persons that his principal would not sell to others at a less price.
58. Factors. A factor, usually called a commission man or consignee, is an agent entrusted with possession of his principal's goods, and ordinarily empowered to sell in his own name. Like any agent who has possession of his principal's goods with power to sell, a factor has power to collect. He differs from a broker in that he has possession of the goods of his principal, and is authorized to sell in his own name, rather than in the name of his principal.
In the absence of contrary custom or express direction, a factor may sell on credit. A factor, until instructed otherwise, may use his discretion as to the time and price of sales, and is entitled to deduct his commission based upon custom in the absence of special contract.
A factor may sue the purchaser in his own name, for the purchase price. The principal may sue in his own name also. Persons dealing with factors may hold the principal responsible for the contracts and representations of the factor, the same as any undisclosed principal. Factors are also personally liable to third persons for their contracts.
A factor must account to his principal for money collected, less his commission and expenses. He is not obliged to keep such money separate from his own, but he must keep accurate account of same, and remit promptly when it is due, according to custom or special contact.
59. Brokers. A broker differs primarily from a factor in that ordinarily he does not have possession of the article dealt in, and acts in the name of his principal rather than in his own name. There are many kinds of brokers engaged in common business life. Some of these are insurance brokers, pawnbrokers, bill and note brokers, and merchandise brokers. In the absence or special authority, a broker does not have authority to collect.
60. Auctioneers. An auctioneer is a special kind of agent employed to dispose of goods to the highest bidder at a public sale.
Some states provide by statute that auctioneers must be licensed, and that they may charge only certain fees. Most licensed auctioneers are required to give bond. In the absence of statutory regulations, any person competent to perform the duties of an auctioneer may so act. An auctioneer differs from an ordinary agent in that, in some respects, he is agent for both seller and purchaser. He is agent for the seller in offering the goods for sale, and in obtaining bids. When the highest bid is received, however, and the hammer falls, he is deemed to be agent for the purchaser, with authority to complete the sale in the purchaser's name. If the contract of sale is within the Statute of Frauds and required to be in writing, the auctioneer has the authority of the purchaser to sign his name to a memorandum of sale, either by himself or through his clerk. The bidder is bound by this contract, made in his presence at the time and place of the sale.
The owner may fix such reasonable terms as he chooses, and the auctioneer must follow out the terms made by the owner. If an owner advertises the terms of the sale, bidders are deemed to have notice of these terms. These terms cannot be varied by the auctioneer. If, however, the owner publishes no special terms of sale, the auctioneer has implied authority to fix customary and reasonable terms. Bidders have the right to rely on such terms and the principal is bound by them.
In the absence of special instructions to the contrary, an auctioneer must sell for cash. He has possession of the goods, consequently has implied authority to receive payment of the price. He has no implied authority to warrant the goods. He cannot bid in his own interest. If bidders fraudulently combine not to bid against each other, for the purpose of obtaining the goods at a cheap price, no title passes to the highest bidder, by reason of the fraud.
So long as the auctioneer acts within his authority and reveals the name of his principal, he incurs no personal liability. But if he exceeds his authority in making a sale he is liable in damages to his principal. If he does not reveal the name of his principal to bidders, he is liable personally to them.
An auctioneer is entitled to recover from his principal the amount of his compensation, including disbursements and expenses incurred in the sale, care and preservation of the property. He is said to have a lien on the goods or proceeds of the sale, for his compensation. By this is meant that he has a right to retain possession of the goods until his compensation is paid, or in the case of sale, to deduct his charges from the proceeds of the sale.
When authorized to sell goods on credit, in case payments are not made when due, the auctioneer may sue in his own name. He may also sue in his own name for wrongful acts of third parties, whereby the goods are injured. The principal also may bring this action in his own name. The principal is liable for the acts of his auctioneer, committed within the actual or apparent scope of the latter's authority.
61. Del Credere Agency. An agent authorized to sell is not permitted to sell on credit, unless expressly so authorized or unless the custom or usage of the particular kind of agency impliedly carries with it this power.
Some agents are, by their contracts of agency, authorized to sell on credit, on condition that they guarantee to save their principals from losses resulting therefrom. Such an agency is called a del credere commission, and the agent is called a del credere agent. This term means that in consideration of the agreed commission or salary paid the agent, the latter agrees to pay to the principal, when due, the sums which third parties, who buy the principal's goods from the agent, fail to pay.
This agreement to indemnify the principal against losses on credits made by the agent, is regarded as an original promise on the part of the agent, and not a promise to pay the debt of another. By reason of this attitude on the part of the courts in interpreting this contract as an original promise on the part of the del credere agent to pay his own debt, and not the debt of another, the contract does not have to be in writing. (See Statute of Frauds.) For example, A, a manufacturer of farm machinery, employs B as agent to sell farm machinery on credit, on condition that B personally guarantees the sales. B sells a mowing machine to C, to be paid for within ninety days. C fails to make payment. A may sue and recover the amount of the purchase price from B.
62. Real Estate Brokers. A real estate broker is one employed to make contracts involving the sale or leasing of real property. The sale of lots, of houses and lots, and farms are common examples.
A real estate broker is seldom authorized to do more than find a purchaser or tenant, not being authorized to make the lease or contract of sale. By reason of this limitation generally placed on a real estate broker's authority, many disputes arise over real estate brokers' rights to compensation. A principal may enter into any kind of contract he desires with a real estate broker, and is liable when the broker has performed his contract, and not before. The difficulty is in determining when the broker has substantially performed his contract. If A hires B to procure a purchaser for his house and lot, and agrees to pay him 2% of the selling price when he obtains the signature of a financially responsible purchaser to a contract of sale, B is not entitled to his commission until he obtains such a party's signature to a contract. The fact that A has entered into this contract with B, does not, in the absence of an express stipulation to the contrary, prevent A from selling the property himself, or from employing as many other brokers as he pleases to attempt to make the sale.
Most brokers, however, are employed on certain terms to obtain a purchaser or tenant. If the agent succeeds in obtaining such a purchaser or tenant, the principal must pay the broker the agreed compensation. The owner cannot act unfairly by the broker. If the broker obtains a tenant or purchaser by seeking him out, and by interesting him in the property, the owner cannot avoid the payment of commission by discharging the broker and completing the deal himself. In the absence of an express agreement to give the broker a certain fixed time in which to make the sale or find a tenant, the owner may discharge the agent at any time he sees fit, just as the agent may cease his efforts at any time he chooses. The owner cannot discharge the agent just as the latter is completing the sale, in order to take advantage of the agent's efforts, without paying him the agreed compensation. The agent, in this event is held substantially to have performed his contract. Contracts with real estate brokers should be carefully drawn, and should contain express stipulations as to the powers and limitation of the broker's authority. The temptation is great on the part of both parties to claim that the sale was, or was not made, through the efforts of the broker. The contract of a real estate broker differs not at all from any other contract. The conditions are such, however, that the agreement is frequently indefinite, and it is difficult to determine when a substantial performance has been made.
In the absence of any agreed compensation, the real estate broker is entitled to receive the customary fees. In the absence of any custom regulating the commission, he is entitled to receive a reasonable compensation.
A real estate broker is not permitted to represent both parties, or to receive compensation from both parties. If a broker is promised compensation from the purchaser which he agrees to accept, without the consent of the owner, he cannot receive compensation from either party.
63. Termination of Agency. If an agent performs the terms of his agency, the agency is said to be terminated by performance. He ceases to be agent, by reason of having performed his contract.
If an agent is employed to act as agent for a specified time, the lapse of the stipulated time, of itself, terminates the agency.
An agency is a contract, express or implied, and it may be terminated at any time by any act of the parties thereto showing such to be their intention. There is one exception to this rule, and that is, that an agency coupled with an interest cannot be terminated by an act of one of the parties. This exception is discussed in a separate section.
Where an agency is terminated by failure or refusal of the principal, or agent to carry out his terms of the contract, the defaulting party is liable in damages to the other party. This does not prevent the termination of the agency however.
A CORNER IN THE NEW YORK OFFICE OF THE H. W. JOHNS-MANVILLE
Where an agency is terminated by the failure or refusal of either party to observe the conditions of the contract of agency, the agency still subsists on the part of third persons, who have dealt with the agent, and who have not received notice of the termination. Upon revoking the agent's authority, the principal must notify third persons, who have dealt with the agent, or who have knowledge of the agency contract, and who would be likely to continue to deal with him as agent. If the principal does not give third parties such notice, he is still liable to them on contracts subsequently made by the agent in the principal's name. For example, if A, a wholesale druggist, employs B to sell goods for one year and C knows of the contract, and at the expiration of six months, A discharges B for failure to give him his exclusive time, A must notify C of B's discharge, else B can still bind A by making contracts with C.
64. Revocation of Agency by Operation of Law. When one of the parties to an agency contract dies, becomes insane or bankrupt, the agency is said to terminate by operation of law. When the principal dies, the agency terminates. Death of itself, constitutes notice to third persons of the termination of the agency. This is true of all agencies except those coupled with an interest, discussed in another section. If any agent and a third person innocently make a contract in the name of the principal after the death of the principal, and without notice of the principal's death, the contract is not enforceable against the principal's estate. Death of the principal revokes the agency. Death of the agent also revokes the agency.
Insanity of the agent, or of the principal terminates an agency not coupled with an interest. It is regarded the same as death of one of the parties.
An agency is terminated by the bankruptcy of either principal or agent. Mere insolvency on the part of the principal or agent does not, of itself, terminate the agency, but bankruptcy, voluntary or involuntary, terminates it, and is of itself, notice to third persons. An innocent third person who has parted with his money on a contract made with the agent after the agency has been terminated by reason of insanity, or bankruptcy of the principal, may not enforce his contract, but may recover his money. Injury or disability of an agent, rendering it impossible for him to carry out the terms of the agency, terminates the agency.
65. Agency Coupled with an Interest. An agency coupled with an interest cannot be terminated by attempted revocation of the principal, nor is it terminated by death, insanity or bankruptcy of the principal or agent.
If the agent has an interest in the subject of the agency outside his interest in his compensation, he is said to have an agency coupled with an interest. Such an agency is irrevocable. A pays B one thousand dollars ($1,000.00) for one eighth interest in a patent, and in consideration of this purchase is given the agency to sell the patented article for a fixed commission. This constitutes an agency coupled with an interest, and is not revoked by an attempted revocation of the principal or by the principal's death. A is indebted to B, his attorney, for one hundred dollars ($100.00). A gives B a note for one hundred and fifty dollars ($150.00) to collect, agreeing to pay him 10% of the amount collected, and to permit him to deduct the one hundred dollars ($100.00) indebtedness. This constitutes an agency coupled with an interest, and cannot be revoked by A.
To constitute an agency coupled with an interest, the interest must be coupled with the subject matter of the agency, and not merely with the compensation the agent is to receive. For example, if A sends his attorney, B, a note to collect, agreeing to give B 25% of the amount collected, this does not constitute an agency coupled with an interest, and may be revoked at any time by A.