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.