BENEFITS CONFERRED WITHOUT CONTRACT.—We next take up that class of relations where there has been an absence of distinct offer and acceptance, and yet a benefit has been conferred resulting in an unjust enrichment of the other party. If A confers benefit on B, though at B's request, it may be merely a gift. A cannot afterward change his mind and recover for that, as if there had been a contract. A may have paid B's debt in order to prevent a sale of his own property. He may then recover the amount so paid. For example, A left his property with B to have some repairs made. A third party recovered a judgment against B, and A's property was seized on an execution. A paid the judgment in order to release his own property. It was held that he might recover the money so paid from B, who should have paid the judgment. Or A may have paid B's debt because he was surety for B. He then may recover from B the amount so paid; or, if B had two sureties, A and C, and A paid the whole or more than his share, he could recover the share of such payment which C should have paid, on the principle of contribution that equality is equity. But A must have actually made the payment of more than his proportionate share.
CHAPTER IV
Principal and Agent; Master and Servant
THE IMPORTANCE OF AGENCY.—Now that we have finished our discussion of the general principles of contract law, it remains for us to apply these principles to the specific topics of commercial law. Of these, the law of agency is one of the most important. It is perfectly obvious that a man can be in only one locality at a given time. Under modern business conditions he may wish to perform acts in different places at the same time. When business men were first confronted with problems of this kind, the principles of the law of agency began to develop. They resorted to the simple expedient of having others represent them. If these representatives were properly instructed in their duties and faithful in discharging them, there was, of course, no reason why the will of the person who had appointed them was not as fully accomplished as if he had performed the act himself. The Latin maxim, "Qui facit per alium facit per se," that is, "He who acts through another, acts himself," is the basis of the law of agency. The growing importance of the law of agency is strikingly apparent in one branch of modern business. Fifty years ago, the great majority of business operations were conducted either by individuals or by partnerships. To-day, especially in conducting large business enterprises, corporations have replaced individuals and partnerships. Although (as we shall see later in the chapter on corporations) in law a corporation is deemed a separate, legal entity, distinct from the stockholders, in actual practice we know that there is no such distinct physical being as a corporation. It follows, therefore, that every act performed by a corporation must be performed through an agent. With the enormous increase in the number of corporations in the last twenty-five years, and that increase still continuing, we can see that the law of agency is a most important branch of commercial law and very closely connected with corporation law.
AGENCY DEFINED.—Merely for purposes of convenience, it may be best to divide the whole subject of agency into three branches: Principal and agent; master and servant; employer and independent contractor. The term "agency," when used in the broad sense, indicates a relation which exists where one person is employed to act for another. At the outset, we should keep in mind the distinctions between the agent, the servant, and the independent contractor. It is difficult to indicate these distinctions with absolute certainty by definition. An illustration, however, will show clearly what the difference is. I own an apartment house in New York, but as I am not in the city, except infrequently, I employ the real estate firm of Smith & Jones to manage the apartments and collect the rents. They are, of course, my agents, to act in the premises. I own an automobile and I employ a chauffeur to operate the car for me. He is my servant. I own a vacant lot in New York and on it plan to erect an office building. I employ the Smith Construction Company to erect the building. It is an independent contractor. What is the rule, then, to determine the distinction between these three persons? All three persons represent the principal, or the master, or the employer, but the line of distinction lies here: An agent is employed to bring the principal into new contractual obligations; a servant represents his master in the performance of ministerial, or mechanical acts or services, with no thought of bringing his master into new contractual relations with third persons. A person who is employed to perform ministerial or mechanical acts for another, as we have said, is a servant, but there are cases where the master retains no control or right of control of the means or methods by which such work is to be accomplished. In this latter case, the person performing the work is not a servant, but is an independent contractor.
HOW AGENCY MAY ARISE.—Although agency undoubtedly originated from the relationship of master and servant, and that relationship from the enforced service rendered by slaves to their master, to-day the law of agency in the broad sense is a contractual relationship. The agent or servant or independent contractor becomes such upon the express or implied request of the principal. Although agency may exist, in so far as third persons are concerned, without any formal contract between the principal and the agent, yet, in the great majority of cases, there is an actual contract between the parties to the relation. Compensation, although usually an element in the contract, is not necessarily a requisite. For instance, I may be liable for the negligent act of my son in running my automobile in connection with my business, although he is acting without any compensation. There are four methods by which the relationship of agency arises: (1) By contract; (2) by ratification; (3) by estoppel; (4) by necessity.
WHO IS OR MAY BE AN AGENT.—The law of agency, as between principal and agent, is simply an application of the general law of contracts, but as between third parties and the principal, or agent, new questions arise. The first question is, who is an agent and who is a principal? Any employer is a principal and any employee is an agent. The employer is a principal whether he employs the employee for a single act or whether he employs him for a period of time. Besides the ordinary cases that you will think of under the head of employer and employee, an officer of a corporation is an agent, the corporation being the principal. The president of a corporation is as much an agent as a clerk in the employ of the corporation. A partner is an agent—of the firm. These different kinds of agents are distinguished chiefly in the different scope of the authority which they possess.
DISABILITY.—In our discussion of contracts, we found that certain persons were under disability so far as making contracts was concerned. We mentioned the case of infants, married women, insane persons, and the like. The same disabilities do not exist in the law of agency, so far as the agent is concerned. Any person may act as an agent or servant. So infants, married women, slaves, and even lunatics, may be agents or servants whose acts will bind their principals. It has been held that even a dog may be an agent. As to who may be a principal, the ordinary rules of contracts, as we have discussed them, may be relied upon as giving the correct rule.
AGENCY BY CONTRACT.—Concerning agency which arises by contract, little need be said. A contract of agency must possess all of the elements of the ordinary contract, such as mutual assent, consideration, competent parties, legality of object, and in some cases, a particular form. The general principles of contract law as we have discussed them are applicable to this method of forming the agency relationship.