RIGHT OF PRINCIPAL TO FIDELITY.—Finally, the agent is under a duty of fidelity or loyalty to his principal. The principal is entitled to demand that the agent, unless the contrary is agreed, shall make the employment or agency his sole interest in regard to that particular thing. Of course, in many agencies the agent is undertaking a great deal of outside business besides the particular agency in question, and he has a right so to do so long as the principal has not engaged his whole time, and so long as one agency does not interfere with another. But that last is an important point. An agent who undertakes one task for one principal which occupies only one-tenth of his time cannot take another employment which is inconsistent with that. An agent to sell a particular kind of goods for one principal, even though his agency is not expected to take the agent's whole time, cannot undertake an agency for a competing principal. The two things are inconsistent, and the agent would be disloyal if he accepted.
SIDE COMPENSATION.—Then, again, the agent must not get what may be called "side compensation" of any sort. His whole compensation as agent must be what is due him directly from the principal under the agreement. For instance, if a buyer for a department store gets paid a commission by a firm from which he buys goods, that is a side commission which the buyer as an agent has no right to take; and so strict is the law, that if an agent does take any such extra compensation the principal has a right to recover it from him. Of course, if the principal agrees to side compensation, it is all right for the agent to take it; when the principal agrees to it, it ceases to be what we have called side compensation and becomes part of the agent's direct compensation to which he is entitled under his bargain with his principal.
ACTING AS AGENT FOR BOTH PARTIES.—One of the most common difficulties that agents get into in regard to this requirement of fidelity, and sometimes with entirely good faith, is undertaking to act as agent for both parties. That cannot be done unless each party especially agrees that the agent may act for the adverse party. An attorney-at-law cannot represent two sides of a case. A real estate broker cannot represent buyer and seller, and a stock broker cannot represent buyer and seller. Stock brokers have one practice which perhaps may seem to infringe this rule. A customer comes into a broker's office and says he wants to buy 100 shares of New York Central. About the same time another customer comes in and says he wants to sell 100 shares of New York Central. Now, must a broker go on the exchange and make a purchase for one customer and then a sale for the other, or may he, so to speak, negotiate through himself a sale for the customer who wants to buy from the one who wants to sell? What he frequently does, in fact, is this: He buys and sells from himself, but publicly, giving other brokers the chance to buy or sell if they wish. The broker, according to the rules of the New York Stock Exchange, cannot execute this transaction secretly in his office, but must offer the securities in question on the exchange, and the purchase and sale must be recorded on the ticker. If the bidding and asking prices are more than an eighth apart, he may offer the New York Central at a price midway between the bidding and asking quotations and buy it himself and charge each customer a commission, but he must actually make the offer or bid aloud on the floor. The broker is technically acting for both parties, but he is not fixing the price. He makes an open bid on the exchange, and it may be that would save the transaction.
AGENT'S RIGHT TO COMPENSATION.—What are the rights of the agent against the principal? They are two. First, a right to compensation; that is, a right to the pay that has been agreed upon, or, if no pay was agreed upon but it was understood that there should be some compensation, then a right to reasonable compensation. It is perfectly possible to have an agency without compensation. Frequently one man agrees to act for another without pay, and an agent who is acting without compensation, so long as he acts as agent, is bound to the same obligations to his principal as if he were receiving compensation, only he can withdraw from his agency whenever he sees fit since he is not paid for it. But unless circumstances show that an agency was understood to be without compensation, it would be implied that reasonable compensation was to be paid to the agent for his services.
AGENT'S RIGHT TO REIMBURSEMENT.—The other right of the agent is the right to reimbursement and indemnity. As the agent is acting for the principal, the principal ought to pay all the bills of whatever kind incurred, so long as the agent is acting rightfully within his authority, and the principal is bound to pay all such bills. This obligation of the principal to pay all the bills of the agency means not simply that he must pay actual expenses, but that if liabilities of any kind arise by reason of third persons suing the agent or holding him liable, if the action of the agent was within his authority, the principal must indemnify against any loss.
PRINCIPAL BOUND TO THIRD PERSONS BY AUTHORIZED ACTS OF AGENT.—Now let us turn from the rights of principal and agent as between one another to the rights of third persons. When do third persons get rights against the principal? In the first place, whenever the agent, acting in accordance with his authority, enters into a transaction with a third person on behalf of the principal, the principal is bound to the third person to just the same extent as if he himself had entered into the transaction; but it is not only in cases where express authority is given to the agent that this principle applies.
IMPLIED AUTHORITY OF AGENT.—In many cases the authority given an agent is not expressly stated. One has to rely on the general course of business and on the nature of the employment to determine the extent of the agent's authority. A third person deals with a cashier of a bank, or deals with the paying teller, or he deals with the president; now whether the bank is bound by that dealing depends on what is by general custom, or course of business, the authority of a cashier or a paying teller or a president. If cashiers or paying tellers or presidents generally have certain authority, then it is a fair assumption that this particular officer has such authority.
AUTHORITY TO DO PARTICULAR ACTS.—An agent to sell has generally no authority to make a sale on credit or to receive anything but money; he cannot barter or exchange the property even in part, nor pledge or dispose of the property to be sold in payment of his own debts. For the sale of land an agent's authority ought always to be under seal, and the provisions contained in this power of attorney will be strictly construed. In a sale of personal property, an agent has implied authority to do whatever is usual and necessary in such transactions. He may receive payment if he has possession of the goods, but not otherwise, and warrant the quality, if such goods are customarily sold with a warranty by agents. He cannot sell on credit unless such is the custom, as in the case of commission merchants, nor pledge or mortgage the goods. The agent may not buy on credit unless so authorized, or it is the custom of the trade; but a principal's direction to purchase, without supplying the agent with funds, will imply authority to purchase on credit. The agent must purchase precisely as directed. An agent to manage has an authority co-extensive in scope with the business, and possesses the same power and authority as the principal, so far as management goes, but the agent may not sell or dispose of a business, nor mortgage the property used in carrying it on, nor engage in new and different enterprises. Public agents, i. e., public officers, cannot involve their principals, the municipal corporations whose officers they are, in contract liabilities with third parties unless actually authorized to do the act in question; and all persons dealing with them must inform themselves of the scope of their legal powers.
APPARENT AUTHORITY OF AGENT.—But it is not only in cases where the agent is expressly authorized, or authorized by such implication as we have just alluded to, that the principal is bound. There is the further case where the agent has apparent authority, although, as a matter of fact, he has no authority. Take the case of a cashier certifying a check. We will suppose that cashiers, generally, have authority to certify checks. With most cashiers that would be what we have called an implied authority, as it arises from the general nature of their positions though nothing was ever said about it by the bank directors. But suppose in a particular bank it was a rule of the bank, expressly stated and voted by the directors, that the cashier should not have power to certify checks. Now, no one can say that his power here is either express or implied; it is certainly not express, and any implication that might otherwise arise from his position is negatived by the express vote of the directors, and yet if that cashier should certify a check to any person ignorant of this limitation on his authority the bank would be bound by the certification because the cashier has apparent authority. He looks to the world as if he had authority, and seems to the public like any other cashier. Most of the difficult cases in agency, so far as liability of the principal to third persons is concerned, relate to this matter of apparent authority.
ILLUSTRATIONS.—Compare the following case with the case of the cashier above alluded to: A man who is giving some support financially to a book dealer writes a note in which he says, "I authorize A B to buy a stock of books not exceeding, at any one time, $5,000." The book dealer shows that written authority to persons from whom he wishes to buy books. They sell him books, and, unknown to the last person who thus sells him books, he has just before bought a quantity which makes the total largely exceed $5,000. Is the principal liable to the persons who last sold books to the dealer? The answer is no. And what is the difference between that case and the cashier case? In the book case the last seller saw the paper giving authority to the book dealer to purchase. He had no reason to know that the day before a large quantity of books had been purchased. He acted in entire good faith and the deception was natural. Still, the employer, or the writer of the letter, has done nothing here to make the last seller suppose that $5,000 worth of books had not already been bought, nor does the course of business justify the last seller in supposing they might not already have been bought. It was a hard question for him to find out, but on the face of the letter it was evident that any one who dealt with the bookseller might have to determine this question or rely at his peril on the bookseller's word. Here is another case: a town treasurer was authorized to borrow a certain sum of money. He gets a certified copy of the vote and goes to one bank and borrows the money, and goes to another bank with that same certified copy of the vote and borrows the money over again. Is the town liable to the second bank? No; on the face of the paper there was but one loan to the town authorized, and any one who lends the money must at his peril find out whether a loan has already been made. When we say, therefore, that a principal is bound if his agent had apparent authority, we do not mean that whenever a third person is deceived into the belief that the agent has authority, the principal is bound. Quite to the contrary, the principal must have in some way been the cause of that deception; he must have caused it either by some express representations, or he must have caused it by putting a man in a place where the general course of business would induce the public to believe the agent had greater powers than he had.