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.