Commercial Law

by Richard D. Currier; Richard William Hill; Samuel Williston

POWERS OF ATTORNEY.—In connection with the formation of agency by contract, special attention must be given to powers of attorney. A power of attorney must oftentimes be given in order to convince third persons that the agent really is an agent, with the powers which he claims to possess. A power of attorney is nothing more than a written statement that a particular person is the agent of another person, with the powers stated in the document. A power of attorney may be very broad, giving the agent very wide powers, or may be narrow, giving the agent or attorney power to do only a specific thing. Now, many powers, so far as the law itself is concerned, might just as well be oral as written, but you could not induce third parties to deal with the agent and believe that he had authority unless he showed as proof of it a power of attorney. That is why a power of attorney is generally given; not that the law requires it, but that the agent may have evidence of his agency which will satisfy third persons that he is really the agent. A corporation would not transfer stock without a written power presented to it; yet, if it chooses to run the risk, there would be nothing illegal in doing so. But it does not choose, and an attempt to compel it to transfer would be held unreasonable unless the authority of the person claiming to be empowered to transfer the stock were in writing and shown to it.

WITNESSED AND SEALED POWERS OF ATTORNEY.—A witness is not necessary on a power of attorney. A witness on a power of attorney has the same effect as on any other document where a witness is not absolutely required, and that is this: if the signature of a document is called in question and the signature is witnessed, the way which the law requires proof of the signature is by calling the witness to testify, and no other evidence is permissible until the witness is produced or his absence accounted for; that is, some adequate reason given and proved for not producing the particular man who witnessed the signature. For this very reason it is sometimes more difficult to prove a signature which is witnessed than one which is not. A signature which is not witnessed may be proved by anybody who has seen the person sign, or who is familiar with his signature, and who can testify that the signature in question is his. The object of a witness is to provide certain evidence that a signature is genuine. The testimony of a witness may be more convincing in case of a dispute than testimony of one who merely recognizes the signer's handwriting. A witnessed power of attorney might be, however, more difficult to prove if the power of attorney were contested than if it was not witnessed, that is, if the witness could not be found. On the other hand, if you had your witness within reach it would be easy to prove the signature by him. The whole matter of witnesses to deeds and other documents, where a witness is not absolutely required, may be thus summarized: it is a good thing to have a witness if the witness is a reliable, well-known person who can always or generally be reached. It is a bad thing to have a witness who is a servant or a person whom you may lose sight of after some time has elapsed. The question may also be asked: How does a power of attorney, when given under seal, compare with one without a seal? One is as good as the other, except that if it is desired that the attorney or agent shall execute any instrument under seal, such as a deed of real estate, the power must itself be under seal; but a power to do anything which does not require the execution of a sealed instrument is just as good without a seal as with one. This, however, is true; if the power contains an agreement by the principal not to revoke the power, this agreement will not be binding if there is neither seal nor consideration, but will be binding without consideration if under seal, in a State where seals still have their common-law effect. The principal will be able, it is true, even in such a case, to revoke the power, but he will commit a breach of contract if he does.

AGENCY BY RATIFICATION.—Where the assent of the principal to the act of the agent is given after the act is performed, it is in the nature of a ratification of the act, and is intended to clothe the act with the same qualities as if there had been a previous authority or appointment. Suppose, for example, A and B are acquaintances. Both are wealthy. A is a good judge of horses and knows B likes good horses. A discovers what he considers a good horse and buys it for B at a very low price. He tells B the next day what he has done and B goes to get the horse and tenders the price, but the dealer refuses to sell, as he has been offered a higher price. B has a cause of action for breach of contract, for by ratifying A's act, he has made a binding contract between himself and the dealer. Suppose in the same illustration, A had selected two horses for B, but when B saw them he decided to take only one of them. In that case, there would be no contract, for it is fundamental that a ratification, to be effective, must be of the whole contract, and not of a part. A ratification, once it is given, dates back to the original transaction and is irrevocable.

FORMATION OF AGENCY BY ESTOPPEL.—An estoppel may be said to arise where a person does some act which will preclude him from averring anything to the contrary. So, if one holds out another as his agent, he is estopped to repudiate the acts of such a person within the scope of his ostensible authority. In the case of Bradish v. Belknap, 41 Vt. 172, the facts were that for a long time prior to 1863, B was the agent of the defendants in selling stoves. This fact was generally known and was well known to the plaintiff. In 1863 B ceased to be the agent of the defendant, but continued to sell stoves, which he purchased of the defendants. No public notice of the termination of the agency was given, nor was the fact known to the plaintiff. B continued to represent himself as agent of the defendants and was in the habit of taking notes for stoves sold, payable to the defendants, and this was known to the defendants. The plaintiff, believing B to be the agent of the defendant, offered to buy a stove of him and pay him in pine lumber. To this B assented and the lumber was accordingly furnished to B and the defendants, together with other lumber which the plaintiff charged up to the defendants. The defendants later attempted to escape liability for the lumber furnished in excess of the value of the stove. The court, holding them liable, said: "B during all this time was perfectly poor and irresponsible, and this fact was known by both parties. B represented himself as the agent of the defendants, and the conduct of the defendants was such as to justify the plaintiff in regarding them as the principals; and we can hardly conceive it possible under the circumstances that the defendants did not understand that the plaintiff so regarded them. And to allow them now to deny the agency and thus defeat the plaintiff's right to recover for the balance of the lumber would be permitting them to perpetrate a palpable fraud on the plaintiff."

ESTOPPEL DEFINED.—This term will occur several times in the different topics of commercial law. An estoppel may be said to arise when a party by conduct or language has caused another reasonably to believe in the existence of a certain state of things and the other party acts on that belief, the first party is precluded from denying the existence of that state of things to any one who has justifiably relied on his language or conduct.

ILLUSTRATION.—There is a common saying in admiralty, that a seaman's claim for wages is nailed to the last plank of the vessel. So if boatswain John Silver is left unpaid by his vessel in London and he later finds the vessel in New York, although its ownership has entirely changed meanwhile, he may still file a libel for his wages and have the United States Marshal for the Southern District of New York seize the vessel. Suppose however you contemplate buying a vessel. You go on board with the present owner and while all the members of the crew are lined up on the main deck, you ask him in a voice loud enough to be heard by everybody whether there are any unpaid wage claims. He replies that everything is paid to date. The crew remain silent. You purchase the vessel and a few weeks later members of this same crew seek to collect from the vessel a wage claim of one year's standing. Their claims against the vessel or against you as owner are unenforcable. In other words, they are estopped because of their conduct when you purchased the vessel. If a person does not speak when he ought, at times the law will not allow him to speak when he wishes. Boatswain Silver had never done anything to preclude him from asserting his wage claim. His, therefore, is not a case of estoppel.

AGENCY BY NECESSITY.—The authority of the agent may be enlarged by some particular necessity or sudden emergency in which case it is the duty of the agent to act, even though he cannot receive the advice or directions of his principal. This method of creating the agency relationship is one upon which the courts are not agreed, and there is great conflict in the decisions. The case of Gwilliam v. Twist, (1895) 1 Q. B. 557, and 2 Q. B. 84, is a good illustration of how close the line may be drawn. The facts were that the driver of an omnibus belonging to defendants became intoxicated while on duty and was taken from his seat by a policeman. A man who happened to be standing near volunteered to drive the omnibus to the defendant's yard, and the driver and conductor acquiesced, the former warning him to drive carefully. The volunteer in negligently turning a corner ran over and injured the plaintiff, who brought action for damages against the defendants, owners of the omnibus. The trial court held, with considerable hesitation, that the defendants were liable for the injury, placing its decision upon the ground of agency by necessity; but the court of appeal reversed the decision on the ground that the necessity did not sufficiently appear, since the defendants might have been communicated with, and left open the question whether, if there had been an actual necessity, the defendants would have been liable.

RIGHT OF PRINCIPAL TO DILIGENT AND SKILLFUL SERVICE.—Let us consider, first, the rights of the principal and agent as between one another. The rights which the principal has against the agent are, first, a right to have the employee render reasonably diligent and skillful service. The amount of skill which the employer can fairly demand from his agent depends on the character of the contract between the two and on the circumstances justifying the principal in expecting a greater or less degree of skill. When a man employs an expert accountant to act for him he has a right to expect greater skill than if he were employing an ordinary bookkeeper. It depends on the character of the work and of the man employed. The amount of compensation paid to the employee may also have a bearing on the amount of skill the employer has a right to expect.

RIGHT OF PRINCIPAL THAT AGENT SHALL NOT EXCEED HIS AUTHORITY.—The second right that a principal has is to demand from his agent that the agent shall act in obedience to instructions and only within the limits of his authority. These limits may be fixed expressly in the contract between principal and agent, or they may be left wholly to implication from the nature of the employment. Perhaps more commonly they are partly fixed by express agreement and partly fixed by natural implications which arise from the nature of the employment.

RIGHT OF PRINCIPAL TO ACCOUNTING.—Thirdly, the principal has a right in financial dealings with his agent, or in regard to financial dealings of the agent with third persons, to demand an account from his agent. It is not enough that the agent actually expend money intrusted to him correctly; he must furnish a correct account of expenses and of collections.