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.