(logo)
(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Open Source Books | Project Gutenberg | Biodiversity Heritage Library | Children's Library | Additional Collections

Search: Advanced Search

Anonymous User (login or join us)Upload
See other formats

Full text of "A treatise on the law of agency, including not only a discussion of the general subject, but also special chapters on attorneys, auctioneers, brokers and factors"


^ 

y 0Aavai 



^lOS-AN 




6 

O ii_ 

5 s <? 

%a3Aif 



^lOS-ANGELFju 




-jAUIBR/ 

*C u3 






A TREATISE 



ON THE 



LAW OF AGENC1 7 



INCLUDING NOT ONLY A DISCUSSION OF THE GENERAL SUBJECT 



SPECIAL CHAPTERS ON 



7" 



By FLOYD R. MECHEM, LL.D. 

AUTHOR OF MECHEM ON PUBLIC OFFICERS, MECHEM ON SALES, ETC. ; FORMERLY TAPPAN 

PROFESSOR OF LAW IN THE UNIVERSITY OF MICHIGAN ; PROFESSOR OF LAW 

IK THE UNIVERSITY OF CHICAGO 



SECOND EDITION 

IN TWO VOLUMES. 



VOLUME II 



CHICAGO 

CALLAGHAN AND COMPANY 
1914 



T/IKOA r TO 77 A J. 



3HT 



Entered according to Act of Congress, in the year 1888, by 

FLOYD R. MECHEM, 
In the office of the Librarian of Congress, at Washington. 

C'/1U1J1 l/h Mr! X njL'l 7J )] [ J J/x ,s I k.-i r^lUi I A 



Copyright, 1914, 

by 
FI.OYD R. MECHEM. 

Mj&S-^&r 

19 14 



Cm A KAl 





TABLE OF CONTENTS, VOL. II. 



CHAPTER V. 

THE DUTIES AND LIABILITIES OF THE PRINCIPAL TO THIRD 

PERSONS 

[References are to sections: 1-1705, Vol. I; 1706-2588, Vol. II.] 

Purpose of chapter 1706 

I. THE LIABILITY OF THE PRINCIPAL UPON CONTRACTS MADE BY AN AGENT 

In general 1707 

1. The Contractual Liability of the Disclosed Principal 

In general 1708 

Principal liable on contracts made in his name by his authority 1709 

Principal liable on informal contracts not expressly charging agent's 

responsibility 1710 

Informal entries or charges against agent not conclusive 1711 

Principal may often be liable though agent also bound 1712 

Written contract in agent's name Principal not liable 1713 

Same subject Principal liable 1714-1716 

Principal not liable where credit given exclusively to agent 1717 

For what contracts and contractual act* of agent is principal liable. . . 1718 

Qui facit per alium, facit per se 1719 

Principal liable for acts and contracts within scope of authority 1720 

Third person must ascertain agent's authority 1721 

What constitutes authority 1722 

Secret instructions and restrictions of principal or secret motives 

of agent Mistake of agent 1723 

General and special agents 1724 

Special agent's authority must be strictly pursued 1725 

Effect of ratification 1726 

Performance of unlawful act not enforced 1727 

Principal not bound where agent had an adverse interest 1728 

2. The Contractual Liability of an Undisclosed Principal 

Preliminary considerations as to liability 1729, 1730 

General rule Undisclosed principal liable when discovered 1731 

Rule applies to all simple contracts 1732 

Parol evidence to identify the principal 1733 

Does not apply to contracts under seal 1734, 1735 

Does not apply to negotiable instruments 1736 

Exceptions to the general rule 1737 

Of the first exception Change in accounts Misleading conduct 1738 

Thompson v. Davenport 1739 

Heald v. Kenworthy 1740 



IV TABLE OF CONTENTS 

[References are to sections: 1-1705, Vol. I; 1706-2588, Vol. II.] 

Armstrong v. Stokes 1741 

Irvine v. Watson In the Queen's Beiich 1742 

Irvine v. Watson In the Court of Appeal 1743 

What is misleading conduct 1744 

- Delay, etc 1745-1747 

The rule in the United States 1748 

General conclusions 1749 

Of the second exception "Election" 1750 

Theories of election 1751 

Knowledge necessary 1752, 1753 

What constitutes an election 1754 

I. Before discovery of principal 1755 

II. After discovery of principal . . 1 '.'}?. .'MH^i'TJ .-i 1 . 1 . 1 . ;'?. IfH'.'l'j'A W. 1756 

Presenting claim 1757 

Commencement of act ion 1758 

Taking judgment against agent 1759 

Taking agent's note 1760 

Charging goods to agent 1761 

Mere delay Statute of limitations . . .'I 1 . . . . 1 ?lll . n . L J 1762 

Intermediate party must have been agent and not principal 1763 

Alleged agent must have been really such 1764-1766 

- "Apparent" authority "A 1 .!? .???. . . . . 1767, 1768 

Right of assignee of other party against principal V???V?.f. : 1769 

Apparent agent the real principal rXXfl'* 1770 

Excluding principal's liability by terms of contract 1771 

Cases in which the agent may not be liable 1772 

II. BESPONSIIULITY OF THE PRINCIPAL FOR THE AGENT'S STATEMENTS, REPRESENTA- 
TIONS AND ADMISSIONS 

In general 1773 

Agent's authority must be first shown 1774 

Authority cannot be shown by agent's admissions 1775 

Representations by agent .- .?I : J'.*7?. J .^ f J'. ''.'?. k .... 1776 

Principal liable for statements and representations expressly author- 
ized : : 1777 

Statements of agent expressly authorized to give, or referred to for, 

information 1778 

Statements of agent impliedly referred to for information 1779 

Statements of agent made as incidents of his position General man- 
ager General agents, etc 1780 

Statements of agent made as incident to an authorized act Res gestae 1781 

Various statements of the doctrine 1782 

Limitations upon the rule 1783 

Further limitations 1784 

-How question determined 1785 

Effect of these statements not dependent upon their being true 178R 

Statements showing notice to or knowledge by the agent 1787 

Statements of agent made to modify, qualify or explain the act 1788 

Illustrations . , 1789 



TABLE OF CONTENTS V 
[References are to section*: 8 1-1705, Vol. I; 8 1706^2588, Vol. II.] 

Statements indicative of the agent's state of mind 1790 

Words themselves constituting or aggravating the wrong 1791 

Admissions of agent generally not competent to charge principal 1792 

Declarations and admissions of agent as part of res gestae 1793 

Meaning of res gestae as here u^ed 1794 

What sort of statements admissible 1796 

What embraced within res gestae 1796 

How admissibility determined 1797 

Illustrations of what has been called part of the res gestae Inadmis- 
sible declarations 1798 

Illustrations Admissible declarations 1799 

When principal bound by agent's representation of extrinsic facts upon 

which authority dep&nds 1800 

Illustrations Bills of lading Warehouse receipts Certified 
checks 1801 

III. THE EFFECT UPON THE PRINCIPAL'S EIGHTS AND OBLIGATIONS OF NOTICE TO OR 
KNOWLEDGE IN HIS AGENT 

In general 1802 

General rule No.tice to the agent is notice to the principal 1803 

Illustrations 1804 

The theory of the rule a. Identification 1805 

6. Conclusive presumption of communication 1806 

I. Notice acquired during agency 1807 

II. Knowledge acquired prior to agency 1808 

Requirements of present knowledge 1809-1811 

What is meant by notice acquired "during the agency" or "prior 

to agency" '. 1812 

The resulting rule 1813 

The first exception Privileged communications 1814 

The second exception Agent acting adversely to principal 1815 

Reasons for the exception 1816 

Further of these reasons 1817-1821 

The true exception 1822-1824 

Applicability of exception to corporate agents 1825 

The third exception Collusion of party claiming benefit of notice .... 1826 

Who can avail himself of the notice 1827 

What notice includes Actual and constructive notice 1828, 1829 

Agent must be agent of person to whom notice is to be imputed 1830 

Rule applies only to notice respecting matters within agent's authority 1831 

Notice after termination of authority does not bind 1832 

Notice must be of some material matter 1833 

Notice must come to someone who is an agent 1834 

Ratification 183~> 

Releasing agent from duty Enlarging it 1836 

Agent of two principals .-*h<a> 1837-1839 

Two agents of same principal 1840 

ivuil .' 



VI TABLE OF CONTENTS 

[References are to section*: 1-1705, Vol. I? 170<^25S8, Vol. II.] 

Notice to snbagent when notice to principal 1841 

Notice of what sort of facts imputed .>.;: i'JlyU'pWiP. g?'. 1842 

These rules apply to corporations Notice to agent .33$.-l l *.<Vl!*&- 1843 

What officer or agent -;l r i.'Jv; *tft'3 .WiVr-. 1844 

Ordinary exceptions apply here .-. wl'i'i 1845-1847 

When notice must be acquired 1848-1850 

When notice to director is notice to corporation 1851-1853 

Notice to stockholder not notice to the corporation 1854 

IV. THE LIABILITY OF THE PRINCIPAL FOR HIS AGENT'S TORTS AND CRIMES 

In general 1855 

Theories of liability 1856, 1857 

1. Did Relation of Principal and Agent or of Master and Servant Exist 

Necessity for existence of the relation 1858 

When relation exists 1859 

Several masters of one servant General and special master 

Lending servants Adopting servants of others 1860 

Servant performing his own master's business under direction of 

master's employer 1861 

Furnishing persons to be employed as servants 1862 

Tests for determining question 1863 

Court or jury 1864 

Contractual agreement as to who shall be principal 1865 

Strangers assisting servants 1866-1869 

Independent contractors 1870, 1871 

Subagents 1872 

2. Liability for Acts Expressly Directed 
Principal liable for acts expressly directed 1873 

3. Liability for Negligent Act of Servant or Agent 

Liable for agent's negligent act in course of employment 1874 

Liability dependent upon agency 1875 

Rules stated 1876, 1877 

Forms of negligence 1878 

What meant by course of employment 1879 

Not merely a question of time or place 1880 

Master's prohibition or warning not conclusive 1881 

Intention to benefit the master not the test 1882 

Principal's ignorance or good faith will not exonerate him 1883 

Ordinary and natural attributes in the light of the event 1884 

The question of apparent powers 1885 

Illegal or unlawful acts 1886 

Application of rules 1887 

Illustrations 1888 

Further illustrations 1889-1891 

Forbidden acts 1892, 1893 

Act of servant having large degree of discretion 1894 



TABLE OF CONTENTS vii 

[Reference** are to sections: 1-1705, Vol. I; ITOe-ZJIS^ Vol. II.] 

Servant combining his own business with that of master 1895 

Servant using master's vehicle, implement, etc., upon servant's 

business Facilitating master's business 1896 

Servant under immediate direction of patron of master 1897 

Master not liable for negligence not in course of employment 1898 

Departure from service Detour 1899 

Distinction between a mere detour and a departure 1900 

Illustrations 1901-1904 

Resumption of service after departure 1905, 1906 

Comments on these views 1907, 1908 

Other acts not within course of employment 1909-1911 

Further illustrations 1912 

Injuries to servants' invitees 1913 

Negligence when servant off duty 1914, 1915 

How question determined 1916 

Master's liability for acts of independent contractor 1917-1920 

Effect of ratification 1921 

4. Liability for Trespass or Conversion 

Liable for trespass or conversion in course of employment 1922 

Special cases 1923 

Illustrations 1924 

Not liable if acts were not within course of employment 1925 

5. Liability for Wilful or Malicious Acts of Servant 

In general 1926-1929 

Special classes of cases 1930 

I. Where the master owed the plaintiff a special duty 1931 

Non-delegable duties 1932 

Rule applied to carriers of passengers 1933 

Illustrations of the carrier cases 1934 

Plaintiff provoking assault 1935 

Limitations of doctrine 1936 

Servant a public officer 1937 

Servant insane 1938 

Application to other cases Difficulty of determining classes 1939-1944 

II. Where master confides to servant the care of a dangerous instru- 
mentality 1945-1950 

III. Where the master entrusts to servant performance of duties in- 
volving the use of force 1951 

Breach of instructions no defense 1952 

Master not liable for servant's personal malice 1953 

Act must have been within course of employment 1954 

Use of force must have been authorized 1955 

Other limitations 1956 

IV. Master's liability for malicious acts in other cases 1957 

Illustrations .-. .'.:. 1958-1972 

False imprisonment and unauthorized arrest 1973, 1974 



Vlll TABLE OF CONTENTS 

[Reference* are to ne<-(l<ii M : g 1-1705, Vol. I; SS 17O6-2588, Vol. II.] 

Unfounded prosecutions 1975 

Malicious prosecution 1976 

Assaults 1977, 1978 

Shooting 1979 

Slander and libel 1980, 1981 

How question decided Court or jury 1982 

Ratification 1983 

6'. Liability for Fraudulent Acts and Representations 

Liability for agent's fraudulent act 1984, 1985 

Agent's fraud supplemented by some act or omission of the prin- 
cipal 1986 

Liability of principal for agent's false or fraudulent representations.. 1987 

No liability for representations if any representation is outside 

authority 1988 

Representations within apparent authority 1989 

Liability for representations not made for principal's benefit.... 1990 

Representations concerning facts which condition authority 1991, 1992 
Liability by ratification or adoption of act 1993 



Effect of misrepresentations Remedies 1994 

Action of deceit 1995,. 1996 

Effect of fraud not avoided by recitals in contract that there was none 1997 

?'. Liability for Penal or Criminal Acts of Agent 

What here involved 1998 

a. Civil Liability 

Principal's civil liability for agent's criminal or penal act -. 1999 

Civil liability for statutory torts committed in course of employment 2000 

No civil liability for acts not in course of employment 2001 

Usury 2002, 2003 

Liability by ratification 2004, 2005 

b. Criminal or Penal Liability 

Principal's criminal liability for agent's criminal or penal acts 2006 

Penal acts 2007 

Illustrations 2008 

Contrary holdings 2009 

8. Matters Relating to Procedure 

Joinder of principal and agent in one action 2010 

Weight of authority permits joinder 2011 

Master cannot be held if servant not liable 2012 

The measure of damages against the principal Compensation 2013 

Exemplary damages 2014 

Exemplary damages not allowed 2015 

Exemplary damages allowed 2016 

Unsatisfied judgment against agent no bar to action against principal 2017 

Principal or master liable although other's negligence also contributed 2018 



TABLE OF CONTEXTS IX 



CHAPTER VI. 

THE DUTIES AND LIABILITIES OF THIRD PERSONS TO THE AGENT 
[References are to sections: 8 1-17O5, Vol. I; 170O-2588, Vol. II.] 

What here involved . 2019 



I. IN CONTRACT 

In general Right of action in principal alone 2020 

Considerations affecting this rule 2021 

How cases may be classified 2022 

Agent may sue when principal has clothed him with title or authority 

for that purpose 2023 

Agent may sue on contract made with him personally 2024 

Undisclosed principal 2025 

Disclosed principal 2026 

When agent only can sue 2027 

Statutes requiring suit by real party in interest 2028 

Assignees of bankrupt agent 2029 

Illustrations of rule permitting agent to sue 2030-2032 

Agent may sue when he has a beneficial interest 2033 

What meant by rule 2034 

What interest suffices 2035, 2036 

Although agent may thus sue, principal may usually sue or control ac- 
tion 2037 

Action on sealed contract, negotiable instrument, or contract made 

with agent personally must be in agent's name 2088 

Agent's rights depend upon the contract 2039 

Right of assumed agent to show himself principal 2040 

1. Where he contracted for a named principal 2041, 2042 

2. Where he contracted for an unnamed principal 2043 

Agent may recover money paid by him under mistake or illegal con- 
tract 2044 

What defenses open to third person 2045 

Set-off 2046 

Admissions Discovery 2047 

What damages agent may recover on contract 2048 

n. IN TORT 

Agent may sue for personal trespass 2049 

When agent may sue for injuries to principal's property 2050 



TABLE OF CONTENTS 



CHAPTER VII. 

THE DUTIES AND LIABILITIES OF THIRD PERSONS TO THE 

PRINCIPAL 

{References are to sections: 1-1705, Vol. I; 88 1706-25S8, Vol. II. J 

In general 2051 

The rule stated 2052 

1. Right to Sue on Contracts Made fty Agent 
a. The Disclosed Principal 

In general , 2053 

May sue on contracts in the name of the principal 2054 

May usually sue on contracts made in his behalf but in agent's name 2055 
May sue on contracts made on his account without authority but sub- 
sequently ratified 2056 

But principal must take contract as he finds it 2057 

Defenses of other party based upon dealings with agent 205S 

&. The Undisclosed Principal 

May sue on contracts made in his behalf but in agent's name 2059 

One of several undisclosed principals cannot sue on entire con- 
tract 2060 

One of several apparently joint parties may show himself to be the 

real principal 2061 

Right of one who contracted as agent to show himself to be the 

real principal 2062 

What actions included 2063 

Exceptions Instruments under seal 2064 

Negotiable instruments 2065 

Principal's remedies here Rescission Enforcement of trust 2066 

How when contract involves elements of personal trust and confidence 2067 

What contracts do involve personal elements 2068 

Contracts of suretyship 2069 

Principal cannot sue where terms of contract exclude him or where 

contract is solely with agent personally 2070, 2071 

Principal's right of action usually superior to agents 2072 

Principal's rights governed by the contract 2073 

When principal subject to defenses which could have been made against 

agent a. Those arising out of terms of contract itself 2074 

- 

b. Payment to agent 2075, 207G 

- c. Set-off of claims against agent 2077, 2078 

Limitations of rule 2079 

Performance by agent 2080 

Release by agent 2081 



TABLE OF CONTENTS XI 

[References are to *<< iou: 8 1-1705, Vol. I; 170 2588, Vol. II.] 

Assignment by agent 2082 

Repudiation of unauthorized contract by other party 2083 

How principal affected by agent's fraud 2034 

How principal affected by notice to or knowledge of his agent 2085 

Principal's action Measure of damages 2086 

Third person cannot set up agent's want of authority to dispute prin- 
cipal's right 2087 

2. Right to Recover- Money Paid or Used by Agent 

In general .'V* V .V-i^i 2088 

o. Money Wrongly Paid on Principal's Account 

Right to recover money wrongly paid on principal's account 2089 

b. Money Wrongfully Appropriated to Agent's Usea 
Principal's right to recover money wrongfully disposed of by agent 

on agent's account 2090-2094 

Illustrations Bank deposits 2095-2100 

Other illustrations 2101-2103 

Further illustrations Restrictive indorsements 2104 

3. Right to Recover Property 

In general 2105, 2IO& 

Principal's title cannot be divested except by his consent or voluntary 

act 210T 

Recovery of property disposed of by agent in excess of authority 2108 

Recovery of property wrongfully disposed of by one alleged to be os- 
tensible agent or owner '. 2109 

Possession as evidence of ownership or authority 2110 

Money Negotiable paper 2111 

Possession confided to recognized sales agent 2112-2114 

Possession coupled with indicia of ownership 2115 

Principal may lose through agent's fraud 2116 

But other party must have acted in good faith and with reason- 
able prudence 2117 

Illustrations Pickering v. Busk 2118 

McNeil v. The Tenth National Bank 2119 

Commercial Bank v. Armsby 2120 

Calais Steamboat Co. v. Van Pelt 2121 

Nixon v. Brown 2122 

Other cases Title put in agent's name Instruments delivered in 

blank 2123 

Limitations on doctrine in general 2124 

Limitations on rule of McNeil v. Tenth National Bank 2125 

Notice of principal's right from descriptive words in document.. 2126 

Rule of McNeil v. Tenth National Bank does not apply to ordinary 

chattels 2127 

Possession under the Factor's Acts 2128 



Xll TAI5LE OF COXTEXTS 

fUeferenoen are to Mectionn: gg 1-1705, Vol. I; gg 1700-Z588, Vol. II.] 

Principal may recover his property appropriated to payment of agent's 

debts or seized by agent's creditors 2129 

Right to recover securities wrongfully released 2130 

Right to recover property wrongfully sold to third person for the 
agent's benefit 2131 

4. Right to Recover for Torts 
Principal may recover for injuries to his interests by third person's 

torts 2132 

For enticing agent away 2133 

For preventing agent from performing 2134 

For personal injury to agent causing loss of service 2135 

Third person not liable to principal for agent's fraud or neglect 213fi 

5. Remedies for Double Dealing 

How when third person conspires with agent 2137 

How when agent in secret employment of the other party 2138, 213M 

One of two principals not liable to other for defaults of their common 
agent 2140 

6. Collusiveness upon Principal of Judgment against Agent 
Principal not bound by judgment respecting property rights against 

agent in action to which he was not a party 2141 

Otherwise as to contract rights 2142 






TABLE OF CONTENTS Xlll 



BOOK V 



PARTICULAR CLASSES OF AGENTS 



CHAPTER I. 

DuA 



OF ATTORNEYS AT LAW 



[References are to HIM- (Ions: 1-1705, Vol. I; 1706-2588, Vol. II.] 

Scope of chapter 2143 

. 

1. OF THE OFFICE 

Who meant by attorney at law 2144 

Attorney at law defined 2145 

Is an officer of the court 2146 

Who may be 2147 

Party may appear in person 2148 

May not appear 'by agent 2149 

, 

II. OF THE RELATION OF ATTORNEY AND CLIENT 

/. A. Relation of Agency 
Rules of agency govern 2150 

2. Plow Created 

No formal power necessary 2151 

III. APPEARANCE PRESUMPTIVELY AUTHORIZED 

Presumption of authority 2152 

The presumption not conclusive 2153 

a. While Proceedings Are Pending 

1. Opposite party may require production of authority 2154 

2. What evidence sufficient 2155 

3. Client may dispute authority 215(5 

6. In Actions upon the Judgment 

1. Foreign judgments 2157 

2. Domestic judgments 2158 

IV. IMPLIED AUTHORITY OF ATTORNEY 

In general 2159 

Has general control of conduct of suit 2160 

Presumption of authority 2161 

What included 2162 

What not included. . 2163 



xiv TABLE OF CONTENTS 

[References are to section*: 88 1-1705, Vol. I; gg 1706-2588, Vol. II.] 

Can not delegate his powers 2164, 2165 

May not employ counsel '.! ; .i.i( }.U. 2166 

May employ subordinates 2167 

Authority to institute action 2168 

Authority to incur expense on client's account 2169 

Authority to bind client by contracts 2170 

Authority to bind clients by bonds. 2171-2174 

Authority to bind client by receipt of notice Notice to attorney as no- 
tice to client 2175-2177 

Authority to bind client by admissions 2178, 2179 

Authority to receive payment : 7/. .? 2180, 2181 

After judgment 2182 

JO 

What constitutes payment 2183 

Authority to enforce judgment 2184-2186 

Ratification 2187 



V. DUTIES AND LIABILITIES OF ATTORNEY TO CLIENT 

Bound to highest honor and integrity 2188 

Duty to disclose adverse interests Must not assume antagonistic po- 
sitions 2189 

Duty to remain loyal Incapacities resulting 2190 

Effect on opposite party ... 2191 

Duty to use reasonable care and skill 2192 

Errors in law or judgment 2193-2195 

Negligence in collecting 2196, 2197 

Negligence in bringing suit 2198-2200 

Negligence in trial of action 2201 

Negligence in examining titles 2202 

Neglect in preparing contracts, etc 2203 

Neglect of partners, clerks, etc 2204 

Neglect of subagent in collecting 2205 

Liability for exceeding authority, or violating instructions 2206 

Liability for money collected 2207 

When action may be brought 2208 

J Statute of limitations 2209 

Liability for interest 2210 

Attorney liable through acting gratuitously 2211 

The burden of proof and measure of damages 2212 

VI. LIABILITY OF ATTORNEY TO TIIIBD PERSONS 

Not liable for breach of duty owing to client only 2213 

Cases in* which he would be liable 2214, 2215 

Liable where he contracts personally 2216 

Liability for clerk's, officer's, witnesses's and other fees 2217 

Liability to third person in tort 2218-2223 

Liability for words written or spoken 2224 

Liability for money received 2225 



TABLE OF CONTENTS XV 
[References are to sections: SS 1-1T05, Vol. I; 1706-2588, Vol. II.] 

VII. LIABILITY OF CLIENT TO THIRD PERSON 

In contract 2226 

In tort 2227, 2228 

VIII. LIABILITY OF CLIENT TO ATTORNEY 

1. Attorney's Right to Reimbursement and Indemnity 

Attorney entitled to reimbursement and indemnity 2229 

2. Attorney's Right to Compensation 

a. In General 

Attorney entitled to compensation 2230 

Attorney may sue for compensation 2231 

1. Where There Was a Special Contract 

In general 2232 

Parties may agree upon amount of compensation 2233 

Where such a contract is fairly made it is conclusive 2234 

Extra compensation 2235 

Contracts for contingent compensation 2236 

What contracts champertous 2237 

Statutory changes 2238 

The effect of champerty 2239 

What contracts barratrous 2240 

Quantum meruit when contract void for champerty 2241 

Agreements restricting settlement 2242 

Contracts for contingent fees do not defeat settlement by client 2243 

But attorney may recover from client 2244 

2. Where There Was No Special Contract 

Attorney entitled to statutory or usual rate, if any, otherwise to rea- 
sonable value of his services 2245 

What evidence admissible 2246 

What evidence not admissible 2247 

6. When Compensation Deemed to be Earned 

In cases of ordinary retainer 2248 

Compensation under express contract earned when undertaking sub- 
stantially performed 2249 

Lack of success no defense 2250 

Negligence or bad faith may be shown 2251 

Fees forfeited by breach of trust 2252 

How when attorney abandons service 2253 

What will justify abandonment 2254 

When discharged by client 2255 

In violation of agreement 2256 



XVI TABLE OF CONTENTS 

[Reference* are to Meetioni: gf 1-17O5, Vol. I) 17O6-25S8, Vol. II.J 

What will justify discharge .................................... 2257 

Effect of death of attorney or client ................................ 2258 

Irrevocable power Powers coupled with an interest ........ 2259, 2260 

Right to interest ............................... . .................. 2261 

When attorney's claim barred by limitation .............. t .......... 2262 

3. Attorney's Right to Lien 

Two kinds of lien .................................................. 2263 

1. The General or Retaining Lien 

General nature of this lien ......................................... 2264 

Declared by statute in some states .................................. 22G5 

What this lien adheres to .......................................... 2266 

a. Upon papers ............................................... 2267 

- b. Upon property .............................................. 2268 

-- c. Upon money ...m^-} -p. ........................................ 2269 

What charges the lien secures ........................... ...... ..... 2270 

Against what parties lien prevails .................................. 2271 



How lien may be lost ................... .- v > \- .......... 

TT 11 i ^ 

How lien may be waived ........................................... 2273 

Enforcement of lien ............................................... 2274 

2. The Special or Charging Lien 

General nature of this lien .......................................... 2275 

In what states it exists ............................................. 2276 

Whom this lien protects ......... ., ..^ ^ fcv ^Maoft- mni^-r ......... 2277 

What this lien protects ............................................. 2278 

When lien attaches ................................................. 2279 

To what the lien attaches .......................................... 2280 

How lien protected Settlement Set off Notice .................... 2281 

- Abandonment Discharge . .................................... 2282 

How lien enforced .................................................. 2283 

If the judgment has resulted in a fund ............... , x ..^,. ..... 2284 

Statute of limitations, etc ...................................... 2285 

Liens by contract Equitable protection independent of lien ........... 228G 

How lien lost or waived ..... ....................................... 2287 

By what law governed ............................................. 2288 

IX. DEALINGS BETWEEN ATTORNEY AND CLIENT 

In general Good faith and perfect fairness required ................ 2289 

Purchases from and sales to client Adverse purchases .............. 2290 

- Private purchases by the attorney of the client's property ...... 2291 

- Gifts from client to attorney ................................... 2292 

- Other dealings ................................................ 2293 

- Contracts for compensation made after relation exists .......... 2294 



TABLE OF CONTENTS XV11 

[Deference* are to Kectlons: 1 1705, Vol. 1} g 170 afiss, Vol. II.] 
X. PRIVILEGED COMMUNICATIONS 

Confidential communications privileged 2297, 2298 

What communications included By client to attorney 2299, 2300 

By attorney to client 2301 

Under what circumstances privileged No suit need be pending 

Must be confidential 2302 

Criminal acts 2303 

- Fraudulent or illegal acts 2304 

Non confidential communications 2305 

Non-professional employments 2306 

Collateral facts 2307 

Relation of attorney and client must exist 2308 

Attorney as scrivener 2309 

Communications must have been made to an attorney 23KJ 

Privilege is the client's Waiver 2311 

How long it continues 2312 

Attorney may disclose for his own protection 2313 

XI. TERMINATION OF THE RELATION 

By operation of law 2311 

By act of the parties 2315 

Notice of termination. .... 231G 



CHAPTER II. 

OF AUCTIONEERS 
Purpose of this chapter 2317 

1. Of the Auctioneer 

Definition 2318 

Who may be 2319 

Whose agent he is 2320 

2. How Authorized 
Like other agents 2321 

3. Auctioneer's Implied Authority 

To fix terms of sale 2322 

To accept the bid 2323 

To make the necessary memorandum 2324 

To receive the price 2325 

To sue in his own name for the price 2326 

None To delegate his authority 2327 

b 



XV111 TABLE OF CONTENTS 

[RefrnceM are to Ke<>tlon: 88 1-17O5, Vol. I: 88 170O-2588, Vol. II.] 

None To sell on credit 2328 

None To rescind or alter sale 2329 

None To sell at private sale 2330 

None To bid for himself '*.&.$'. 2331 

None To warrant quality 2332 

--31:' . iii;a o'.- a iflbttW 

4. Auctioneer's Duties and Liabilities to Principal 

Bound for reasonable skill and diligence 2333 

To act with loyalty and good faith .Mf>>*r>i< 2334 

To obey instructions f!tK*"xvKi-flh 25535 

To account for proceeds 2336 

To take care of goods .**(. i'aatto ixw ^HfwMij-ld'H' 2337 

To sell for cash only 2338 

To sell to third parties only 2339 

To sell in person *.. .>vt 2340 

To disclose his principal 2341 

5. Auctioneer's Duties and Liabilities to Third Persons 

Liable where he conceals principal 2342 

Liable where he exceeds his authority 2343 

Liable where he contracts personally 2344 

Liability for selling property of stranger 2345 

Not liable for not holding auction as advertised 2346 

Liable for refusing to surrender properly bought 2347 

Liability for money received 2348 



6. Auctioneer's Rights Against his Principal 

Compensation Reimbursement Indemnity 2349 

Recoupment of damages of principal 2350 

Auctioneer's lien 2351 

Cannot dispute principal's title 2352 

T. Auctioneer's Rights against Third Persons 

Right to sue bidder 2353 

Right to sue wrong-doer 2354 

8. Principal's Rights against Third Persons 

To recover purchase price 2355 

Where bidder refuses to complete purchase 2356 

9. Rights of Third Persons against Principal 

Principal's liability for auctioneer's acts 2357 

Liability for breach of contract 235S 

Liability for not holding sale, withdrawing property, etc 2359 

Liability for failure of title to goods sold . 2360 



TABLE OF CONTENTS xix 

CHAPTER III. 
OF BROKERS 

[Reference* are to flections: 88 1-1705, Vol. I; 88 1700-2588, Vol. II.] 

iiJl'tr. liea 

Purpose of this chapter . . 2361 

. OiflUii vV. 
I. DEFINITIONS AND DIVISIONS 

Brokers In general 2362 

Different kinds of brokers 2363 

Bill and note-brokers 2364 

Exchange-brokers 2365 

Insurance-brokers 2366 

Distinctions 2367-2369 

Broker's duties to employer 2370 

Right to sue 2371 

Right to lien iC .4Wl .'J'K ;3(it& 2372 

Merchandise brokers 2373 

As agent of both parties 2374 

How authorized 2375 

When special agent 2376 

When not authorized to sign 2377 

"Bought and sold notes" in the English practice. 2378 

English rules governing "bought and sold notes 2379, 2380 

"Bought and sold notes" in the United States 2381 

Pawnbrokers 2382 

Real estate brokers 2383 

Ship brokers 2384 

Stock brokers 2385 

New York rules governing relation 2386 

Broker a pledgee 2387 

Massachusetts rule 2388 

New York view generally adopted Substitution of other shares Re- 
pledge 2389 

<J irfSift A . 

PI. APPOINTMENT AND TERMINATION 

Appointed like other agents 2390 

How authority terminated 2391 

III. IMPLIED AUTHORITY OF BROKERS 

In general 2392 

How affected by usage 2393 

Local usages or customs 2391 

Usual and necessary authority 2395 

Authority to make and sign necessary memorandum 2396 

Effect of instructions 2397 



XX TABLE OF CONTENTS 

[References are to sections: SS 1-1705, Vol. I; g 1706-2688, Vol. II.] 

Acting for both parties 2398 

May not delegate his powers 2309 

Usually must act in the name of his principal 2400 

Implied authority to fix the price , 2401 

Terms of sale ,^.,._ t .^., .,>. r<r*-*.,*>> 2402 

May sell with warranty When 2403 

When may sell on credit 2404 

No authority to receive payment 2405 

No authority to rescind or arbitrate 2406 

No authority to accept or waive performance 2407 

Authority to sell property purchased by him ^frrrtf *}r.- bm>(- T.T 240S 

Authority to pledge property ?(Tr*w-*f\tc !'! 2409 

IV. DUTIES AND LIABILITIES TO PRINCIPAL 

Reasonable skill and diligence required 2410 

Fidelity to his principal Concealing facts Dealing with or for him- 
self 2411 

Acting for both parties 2412 

How when mere "middle man" 2413 

Duty to obey instructions ,rf. }<>.}> 2414 

Illustrations ,{ WM . w > 2415 

Imperiling broker's security 241G 

Duty to keep and render accounts and to pay proceeds and deliver 

property 2417 

V. DUTIES AND LIABILITIES TO THIBD PERSONS 

Not liable when he contracts for a principal disclosed 2418 

Liability when principal concealed 2419 

Liable when he expressly charges himself 2420 

Liable when he acts without authority 2421 

Liability for money received (. ,-f*ic- 2422 

When guilty of a conversion 2423 

VI. BIGHTS OF BKOKER AGAINST PRINCIPAL 

1. Right to Compensation 

Entitled to compensation 2424 

How amount determined 2425 

Broker must show employment Volunteer Ratification 2426 

Broker must have performed undertaking 2427 

Real estate broker Nature of his undertaking 2428, 2429 

Usually need not conclude a binding sale Find purchaser ready, will- 
ing and able to buy 2430 

When is such a purchaser "found?" 2431, 2432 

Contract in particular cases may require less 2433 

Contract with broker need not be in writing 2434 

Broker must be procuring cause May be such though not present at. 

sale Directness of cause 2435, 2436 



TABLE OF CONTENTS XXI 
[References are to Hectiong: 1-1705, Vol. I; g 1706-2588, Vol. II.] 

Must be on terms required 1. Where terms were prescribed 2437 

2. Where no terms were prescribed 2438 

Must be within time limited 2439 

Readiness and willingness of purchaser 2440 

Pecuniary responsibility of purchaser 2441 

Abandonment by broker before success 2442 

Must be sale, not mere option or conditional contract 2443 

Must be sale, not exchange 2444 

Sale by principal in person Exclusive agencies 2445 

Giving time 2446 

Broker's right not defeated, how Principal's default 2447 

Buyer's default 244S 

Revocation of authority 2449 

Reasonable time in which to find purchaser 2450 

Definite time Contract for 2451 

When such contract exists Consideration for 2452-2454 

Performance liberally viewed in order to avoid hardships to broker 2455 

Employment of two or more brokers 2456 

When one entitled How determined 2457 

Same subject Interpleader 2458 

Abandonment by one broker Termination of his authority 2459 

Duty to notify principal, when purchaser found 2460 

How much compensation broker entitled to Quantum meruit 2461 

At what time commission payable 2462 

Broker to sell chattels 2463 

Abandonment by one broker Termination of his authority 2459 

Revocation of authority 2465 

Several brokers 2466 

Broker to effect loan 2467 

Broker to effect exchange 2468 

Bringing parties to terms 2469 

Failure of contract 2470 

Broker to purchase land 2471 

Broker to find a tenant 2472 

Other cases within the same principles 2473 

Commissions from both parties 2474 

How in case of mere middle-man 2475 

How affected by misconduct 2476 

How affected by disloyalty, double dealing, etc 2477 

No compensation where undertaking illegal 2478 

How when not licensed 2479 

2. Right to Reimbursement and Indemnity 

Entitled to reimbursement 2480 

Needless expenses Illegal transactions 2481 

How when undertaking not performed 2482 

S. Right to a Lien 

No general lien 2483 



XX11 TAIJLE OF CONTENTS 

[Reference* are to lectlona: gg 1-1705, Vol. I; gg 1706 2588, Vol. IT.] 

Liens in special cases Stock brokers^ Real estate brokers Insurance 

brokers 2484 

Equitable liens 2485 

No lien except for debt due from principal 2486 

VII. RIGHTS OF BROKER AGAINST THIRD PKKSOXS 

1. In Contract 

In general, no right of action on contracts 2487 

When he may sue 2488 

What defenses may be made when broker sues 2489 

2. In Tort 
May recover when he sustains injury in the line of his business 2*90 

VIII. RIGHTS OF PRINCIPAL AGAINST THIRD PERSONS 

Same as in other cases of agency 2491 

No set-off of broker's debts or obligations 2492 

Right to recover money and property 2493 

IX. BIGHTS OF THIRD PERSONS AGAINST PRINCIPAL 

Same as in other cases of agency 2494 

No remedy if broker did not act as defendant's agent 2495 



CHAPTER IV. 

OF FACTORS 

Purpose of this chapter 2496 

I. DEFINITIONS AND DISTINCTIONS 

Factor or commission merchant defined 2497, 2498 

Distinction between factor and purchaser 2499 

H. HOW APPOINTED 

Same as other agents 2500 

in. IMPLIED AUTHORITY OF FACTORS 

In general 2501 

How affected by usage 2502 

To fix price and terms 2503 

To sell on credit 2504 

To sell in his own name 2505 

To warrant quality 2506 

To warrant title 2507 

To receive payment 2508 

To pledge 2509, 2510 

Under factor's act.. 2511 



TABLE OF CONTENTS XX111 

[Reference* are to neotlons: 1-1705, Vol. I; S 1700-2588, Vol. II.] 

To pay his own debts 2512 

To barter or exchange 2513 

To delegate his authority 2514 

To compromise or compound the debt 2515 

To submit to arbitration 2516 

To rescind sale 2517 

To extend time of payment 2518 

To receive anything but money in payment 2519 

rn l * vi ocon 

To make negotiable paper 2520 

To insure property 2521 



To sell to himself 2522 

IV. DUTIES AND LIABILITIES TO PRINCIPAL 

To use reasonable care and prudence 2523 

To be loyal to his principal's interest 2524 

To obey instructions 2525 

Instructions to sell 2526 

Factor's right to sell, or to decline to sell, for his own protection 2527 

The measure of damages 2528, 2529 

Instructions to sell for cash 2530 

Instructions to insure 2531 

Duty to inform principal 2532 

Duty to sell only to responsible purchaser 2533 

Del credere commission 2534 

Factor's duty to care for property 2535 

Unforeseen contingency Sudden emergency 2536 

General duty as to sales 2537 

Duty as to place of sale 2538 

Duty as to time of sale 2539 

Duty as to price 2540 

Duty in collecting price 2541 

Factor's duty in keeping account 2542 

Not obliged to keep funds separate 2543 

Factor's duty to account for money and property 2544, 2545 

Set-off 2546 

Conclusiveness of accounts 2547 

Duty in remitting money 2548 

When principal may sue factor 2549 

Liability for acts of sub-agents 2550 

V. BIGHTS OF FACTOR AGAINST PRINCIPAL 

a. Commissions 

Factor entitled to compensation 2551 

When factor may have commissions from both parties 2552 

When commission earned Upon what computed 2553 

b. Reimbursement 

Factor entitled to reimbursement 2554, 2555 



XXIV TABLE OF CONTENTS 

[HefereneM are to aeetionii: g 1-17O5, Vol. I; 88 1TO-25S8, Vol. II. J 

- Interest upon advances ....................................... 2556 

- Collusiveness of accounts ..................................... 2557 

c. Indemnity 
Factor entitled to indemnity against losses .......................... 2558 

d. Lien 
Factor entitled to lien ............................................. 2559 

When lien does not exist ........................................... 2560 

Nature of the lien ..................... 2561 

. ..... 

When lien attaches ............................................ 2562-2564 

Who may confer lien ............................................... '2565 

How lien may be lost .............................................. 2566 

How lien enforced ......... ....................... ^^ uWsnrwwr 2567 



VI. BIGHTS OF FACTOR AGAINST THIRD PERSONS 

a. In Contract 
May sue for price of goods sold ................................ 2568, 2569 

- Defences .............................. ........................ 2570 

May sue on contracts made in his name ............................. 2571 

&. In tort 
May maintain trespass, replevin or trover .......................... 2572 

Actions against carriers ........................................... 2573 

VII. BIGHTS OF PRINCIPAL AGAINST THIRD PERSONS 

a. In Contract 
May sue for price of goods sold ..................................... 2574 

- What defenses principal subject to ............................. 2575 

Right to follow property ....................................... 2576, 2577 

b. In Tort 

For injuries to or conversion of the goods .......................... 2578 



Vm. RIGHTS OF THIRD PERSONS AGAINST PBINCIPAI, 

Same as in other cases ............................................. " 2579 

How when principal undisclosed ................................... 2580 

How when exclusive credit given to the factor ....................... 2581 

IX. BIGHTS OF THIRD PERSONS AGAINST FACTOB 

Same as in other cases ........................................... 2582 

When liable for conversion ......................................... 2583 

How in case of foreign factor ..................................... 2584 

X. HOW RELATION TERMINATED 

As in other cases of agency Revocation by principal ................ 2585 

Renunciation by agent ........................................ 2586 

- Lapse of time, etc .............................................. 2587 

- - War, death, bankruptcy ....................................... 2588 



THE LAW OF AGENCY 



BOOK IV. 

OF THE RIGHTS, DUTIES AND LIABILITIES ARISING OUT 

OF THE RELATION 

(Continued) 

CHAPTER V 

THE DUTIES AND LIABILITIES OP THE PRINCIPAL TO THIRD 

PERSONS 



1706. Purpose of chapter. 

I. THE LIABILITY OF THE PRINCIPAL 
UPON CONTRACTS MADE BY AN 
AGENT. 

1707. In general. 

1. The Contractual Liability of the 
Disclosed Principal. 

1708. In general. 

1709. Principal liable on contracts 

made in his name by his 
authority. 

1710. Principal liable on informal 

contracts not expressly 
charging agent's responsi- 
bility. 

1711. Informal entries or 

charges against agent not 
conclusive. 

1712. Principal may often be liable 

though agent also bound. 

1713. - Written contract in 

agent's name Principal 
not liable. 



1714-1716. Same subject 

Principal liable. 

1717. Principal not liable where 

credit given exclusively to 
agent. 

1718. For what contracts and con- 

tractual acts of agent is 
principal liable. 

1719. Qui facit per alium, facit per 

se. 

1720. Principal liable for acts and 

contracts within scope of 
authority. 

1721. Third person must ascertain 

agent's authority. 

1722. What constitutes authority. 
1723. Secret instructions and 

restrictions of principal or 
secret motives of agent 
Mistake of agent. 

1724. General and special agents. 

1725. Special agent's authority 

must be strictly pursued. 

1726. Effect of ratification. 



THE LAW OF AGENCY 



[BOOK IV 



1727. Performance of unlawful act 

not enforced. 

1728. Principal not bound where 

agent had an adverse inter- 
est. 



2. The 

1729. 
1731. 

1732. 
1733. 
1734, 
1736. 
1737. 
1738. 

1739. 
1740. 
1741. 
1742. 

1743. 
1744. 

1745- 
1748. 

1749. 
1750. 

1751. 

1752, 

1754. 
1755. 

1756. 



Contractual Liability of an 
Undisclosed Principal. 

1730. Preliminary considera- 
tions as to liability. 

General rule Undisclosed 
principal liable when dis- 
covered. 

Rule applies to all simple 
contracts. 

Parol evidence to identify the 
principal. 

1735. Does not apply to con- 
tracts under seal. 

Does not apply to negotiable 
instruments. 

Exceptions to the general 
rule. 

Of the first exception 
Change in accounts Mis- 
leading conduct. 

Thompson v. Davenport. 

Heald v. Kenworthy. 

Armstrong v. Stokes. 

Irvine v. Watson In 

the Queen's Bench. 

Irvine v. Watson In 



the Court of Appeal. 

What is misleading con- 
duct. 

1747. Delay, etc. 

The rule in the United 
States. 

General conclusions. 

Of the second exception 
"Election." 

Theories of election. 

1753. Knowledge neces- 
sary. 

What constitutes an election. 

I. Before discovery of prin- 
cipal. 

II. After discovery of prin- 
cipal. 



1757. Presenting claim. 

1758. Commencement of ac- 
tion. 

1759. - - Taking judgment 

against agent. 

1760. Taking agent's note. 

1761. Charging goods to agent. 

1762. Mere delay Statute of 

limitations. 

1763. Intermediate party must 

have been agent and not 
principal. 

1764-1766. Alleged agent must 
have been really such. 

1767, 1768. "Apparent" author- 
ity. 

1769. Right of assignee of other 

party against principal. 

1770. Apparent agent the real prin- 

cipal. 

1771. Excluding principal's liabil- 

ity by terms of contract. 

1772. Cases in which the agent may 

not be liable. 

II. RESPONSIBILITY OF THE PRINCIPAL 
FOB THE AGENT'S STATEMENTS, 
REPRESENTATIONS AND ADMIS- 
SIONS. 

1773. In general. 

1774. Agent's authority must be 

first shown. 

1775. Authority cannot be shown 

by agent's admissions. 

1776. Representations by agent. 

1777. Principal liable for state- 

ments and representations 
expressly authorized. 

1778. Statements of agent of agent 

expressly authorized to 
give, or referred to, for in- 
formation. 

1779. Statements of agent implied- 

ly referred to for informa- 
tion. 

1780. Statements of agent made as 

incidents of his position 
General manager General 
agents, etc. 



1294 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



1781. 

1782. 
1783. 

1784. 
1785. 

1786. 

1787. 
1788. 



1789. 
1790. 

1791. 



1792. 
1793. 

1794. 
1795. 
1796. 
1797. 
1798. 

1799. 
1800. 



Statements of agent made as 
incident to an authorized 
act Res gestae. 

Various statements of 

the doctrine. 

Limitations upon the 
rule. 

Further limitations. 

How question deter- 
mined. 

Effect of these statements not 

dependent upon their being 

true. 
Statements showing notice to 

or knowledge by the agent. 
Statements by agent made to 

modify, qualify or explain 

the act. 

Illustrations. 

Statements indicative of the 

agent's state of mind. 

Words themselves constitut- 
ing or aggravating the 
wrong. 

Admissions of agent gener- 
ally not competent to 
charge principal. 

Declarations and admissions 
of agent as part of res ges- 
tae. 

Meaning of res gestae 

as here used. 

What sort of statements 



admissible. 

What embraced within 

res gestae. 

How admissibility de- 
termined. 

Illustrations of what has 
been called part of the res 
gestae Inadmissible decla- 
rations. 

Illustrations Admissi- 
ble declarations. 

When principal bound by 
agent's representation of 
extrinsic facts upon which 
authority depends. 



1801. Illustrations Bills of 

lading Warehouse receipts 
Certified checks. 

III. THE EFFECT UPON THE PRINCIPAL'S 
RIGHTS AND OBLIGATIONS OF NO- 
TICE TO OR KNOWLEDGE IN HIS 
AGENT. 



1802. 
1803. 



1804. 
1805. 

1806. 
1807. 
1808. 
1809- 
1812. 



In general. 

General rule Notice to the 
agent is notice to the prin- 
cipal. 

Illustrations. 

The theory of the rule 
a. Identification. 

b. Conclusive 



1813. 
1814. 

1815. 



1816. 
1817- 

1822- 
1825. 

1826. 

1827. 
1828, 



presump- 
tion of communication. 

I. Notice acquired during 
agency. 

II. Knowledge acquired prior 
to agency. 

1811. Requirement o f 

present knowledge. 

What is meant by notice 

acquired "during the 
agency" or "prior to 
agency." 

The resulting rule. 

The first exception Privi 
leged communications. 

The second exception Agent 
acting adversely to princi- 
pal. 

Reasons for the excep- 
tion. 
-1821. - - Further of these 

reasons. 
-1824. The true exception. 

Applicability of excep- 
tion to corporate agents. 

The third exception Collu- 
sion of party claiming 
benefit of notice. 

Who can avail himself of the 
notice. 

1829. What notice includes 
Actual and constructive no- 
tice. 



1295 



THE LAW OF AGENCY 



[BOOK iv 



1830. Agent must be agent of per- 

son to whom notice is to be 
imputed. 

1831. Rule applies only to notice 

respecting matters within 

agent's authority. 
Notice after termination of 

authority does not bind. 
Notice must be of some 



1832. 
1833. 
1834. 



material matter. 
Notice must come to some- 
one who is an agent. 

1835. Ratification. 

1836. Releasing agent from duty 
Enlarging it. 

1837-1839. Agent of two principals. 

1840. Two agents of same principal. 

1841. Notice to subagent when no- 

tice to principal. 

1842. Notice of what sort of facts 

imputed. 

1843. These rules apply to corpora- 

tions Notice to agent. 

1844. What officer or agent. 

1845-1847. Ordinary excep- 
tions apply here. 

1848-1850. When notice must 

be acquired. 

1851-1853. When notice to di- 
rector is notice to corpo- 
ration. 

1854. Notice to stockholder 

not notice to the corpora- 
tion. 



18C1. 

1862. 
1863. 

1864. 
1865. 

1866- 
1870, 

1872. 



Servant performing his 

own master's business un- 
der direction of master's 
employer. 

Furnishing persons to 



be employed as servants. 

Tests for determining 

question. 

Court or jury. 

Contractual agreement as to 
who shall be principal. 

1869. Strangers assisting serv- 
ants. 

1871. Independent contract- 
ors. 

Subagents. 



IV. THE LIABILITY OF THE PRINCIPAL 
FOB HIS AGENT'S TORTS AND 

CRIMES. 

1855. In general. 

1856, 1857. Theories of liability. 

1. Did relation of Principal and Agent 
or of Master and Servant Exist. 

1858. Necessity for existence of the 

relation. 

1859. When relation exists. 

1860. Several masters of one 

servant General and spe- 
cial master Lending serv- 
ants Adopting servants of 
others. 

1296 



Liability for Acts Expressly Di- 
rected. 

1873. Principal liable for acts ex- 

pressly directed. 

Liability for Negligent Act of 
Servant or Agent. 

1874. Liable for agent's negligent 

act in course of employ- 
ment. 

1875. . Liability dependent upon 
agency. 

1876, 1877. Rules stated. 

1878. Forms of negligence. 

1879. What meant by course 

of employment. 

1880. Not merely a question of time 

or place. 

1881. Master's prohibition or warn- 

ing not conclusive. 

1882. Intention to benefit the mas- 

ter not the test. 

1883. Principal's ignorance or good 

faith will not exonerate 
him. 

1884. Ordinary and natural attri- 

butes in the light of the 
event. 

1885. The question of apparent pow 

ers. 

1886. Illegal or unlawful acts. 

1887. Application of rules. 

1888. Illustrations. 
1889-1891. Further illustrations. 
1892, 1893. Forbidden acts. 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES' 



1894. Act of servant having 

large degree of discretion. 

1895. Servant combining his 

own business with that of 
master. 

1896. Servant using master's 

vehicle, implement, etc., 
upon servant's business 
Facilitating master's busi- 
ness. 

1897. Servant under immedi- 
ate direction of patron of 
master. 

1898. Master not liable for negli- 

gence not in course of em- 
ployment. 

1899. Departure from service De- 

tour. 

1900. Distinction between a 

mere detour and a depart- 
ure. 

1901-1904. Illustrations. 

1905, 1906. Resumption of 

service after departure. 
1907, 1908. Comments on these 



views. 

1909-1911. Other acts not 

within course of employ- 
ment. 

1912. Further illustrations. 

1913. Injuries to servant's in- 
vitees. 

1914. 1915. Negligence when serv- 

ant off duty. 

1916. How question deter- 
mined. 

-:1917-1920. Master's liability for 
acts of independent con- 
tractor. 

1921. Effect of ratification. 

4. Liability for Trespass or Conver- 
sion. 

1922. Liable for trespass or can- 

version in course of em- 
ployment. 

1923. Special cases. 

"1924. Illustrations. 

1925. Not liable if acts were not 
within course of employ- 
ment. 
82 1297 



Liability for Wilful or Malicious 
Acts of Servant. 

1926-1929. In general. 

1930. Special classes of cases. 

1931. I. Where the master owed 

the plaintiff a special duty. 

1932. Non-delegable duties. 

1933. Rule applied to carriers 

of passengers. 

1934. Illustrations of the car- 
rier cases. 

1935. Plaintiff provoking as- 
sault. 

1936. Limitations of doctrine. 

1937. Servant a public officer. 

1938. Servant insane. 

1939-1944. Application to oth- 
er cases Difficulty of de- 
termining classes. '!! ,10 

1945-1950. II. Where master con- 
fides to servant the care of 
a dangerous instrumental- 
ity. 

1951. III. Where the master en- 

trusts to servant perform- 
ance of duties involving the 
>9btovj; use of force. 

1952. Breach of instructions 

no defense. 

1953. Master not liable for 

servant's personal malice. 

1954. Act must have been 

within course . pf employ- 
ment. 

1955. Use of force must have 

been authorized. 

1956. Other limitations. 

1957. IV. Master's liability for ma- 

licious acts in other cases. 

1958-1972. Illustrations. 

1973, 1974. False imprison- 
ment and unauthorized ar- 
rest. 

1975. Unfounded prosecutions. 

1976. Malicious prosecution. 

1977. 1978. > Assaults. 

1979. Shooting. 

1980, 1981. Slander and libel. 

1982. 

1983. 



How question decided Court 

or jury. .j Tjiiju 'io ^ 
Ratification. 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 



6. Liability for Fraudulent Acts and 

Representations. 

1984, 1985. Liability for agent's 
fraudulent act. 

1986. Agent's fraud supple- 
mented by some act or omis- 
sion of the principal. 

1987. Liability of principal for 

agent's false or fraudulent 
representations. 

1988. No liability for repre- 
sentations if any represen- 
tation is outside authority. 

1989. Representations within 

apparent authority. 

1990. Liability for representa- 
tions not made for princi- 
pal's benefit. 

1991. 1992. Represent a t i o n s 

concerning facts which con- 
dition authority. 

1993. Liability by ratification 

or adoption of act. 

1994. Effect of misrepresentations 

Remedies. 

1995. 1996. Action of deceit. 

1997. Effect of fraud not avoided 

by recitals in contract that 
there was none. 

7. Liability for Penal or Criminal 

Acts of Agent. 

1998. What here involved. 

a. Civil Liability. 

1999. Principal's civil liability for 

agent's criminal or penal 

act. 
ito ni EJOB aooi'jil 

,_,, , ' <~ ~C[__,"(>f 

1706. Purpose of chapter. It is obvious that one of the most 
important questions in the law of agency is that which deals with the 
duties and liabilities of the principal to third persons, based upon and 
growing out of the acts, declarations, contracts and misconduct of the 
agent in his dealings and transactions with them. To some extent and 
for some time, the agent has been invested with authority by his prin- 
cipal and sent out into the world to obtain for the principal the profits, 
benefits or other objects which he desired, and to bind the principal 

1298 



2000. Civil liability for statutory 

torts committed in course 
of employment. 

2001. No civil liability for acts 

not in course of employ- 
ment. 

2002. 2003. Usury. 

2004, 2005. Liability by ratification. 

6. Criminal or Penal Liability. 

2006. Principal's criminal liability 

for agent's criminal or penal 
acts. 

2007. Penal acts. 

2008. Illustrations. 

2009. Contrary holdings. 

8. Matters Relating to Procedure. 

2010. Joinder of principal and agent 

in one action. 

2011. Weight of authority per- 
mits joinder. 

2012. Master cannot be held 

if servant not liable. 

2013. The measure of damages 

against the principal 
Compensation. 

2014. Exemplary damages. 

2015. Exemplary damages not 

allowed. 

2016. Exemplary damages al- 
lowed. 

2017. Unsatisfied judgment against 

agent no bar to action 
against principal. 

2018. Principal or master liable al- 

though other's negligence 

also contributed. 

.nor 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1706 

when necessary by such representations, contracts and other acts as 
are suitable to the occasion, and within the terms and objects of the 
authorization. 

In pursuing these objects, the agent may have kept either the fact 
of the agency, or the name of his principal, or both, concealed from 
the persons with whom he dealt, and in this event the question arises 
whether, in either case, the actual principal can be made liable when 
discovered. 

Or the agent may have disclosed both the fact of his agency and 
the name of his principal, and in this event it is material to know 
whether the act, contract or representation of the agent, assumed to 
be done or made by virtue of his authority, was in fact within its na- 
ture and its scope. 

~J* V"Wt r TiR ^O >/fi r ti\ 'V 

So the question may arise how far the principal can be held respon- 
sible for the misrepresentations, deceits, trespasses and other wrongs 
committed by the agent in pursuance of, or while engaged in, the un- 
dertaking. For convenience of treatment there will be considered: 

1. The liability of a disclosed principal. 

2. The liability of an undisclosed principal. 

I. The liability of the principal upon contracts made by his agent, 

including: 

IL The responsibility of the principal for the agent's statements, 
representations and admissions. 

III. The effect upon the principal of notice to or knowledge in his 

agent. 

IV. The liability of the principal for the torts and crimes of his 

agent or servant. 
Hereunder will be considered such questions as 

1. Did relation of principal and agent or of master and servant ex- 

ist? 

2. Liability for acts expressly directed. 

3. Liability for negligent acts of servant or agent. 

4. Liability for trespass or conversion by servant or agent. 

5. Liability for wilful or malicious acts of servant or agent. 

6. Liability for fraudulent acts and representations of servant or 

agent. 

7. Liability for penal or criminal acts of agent 

8. Matters relating to procedure. 

1299 



177- 1 79] THE LAW OF AGENC * [BOOK iv 



I. 
THE LIABILITY OF THE PRINCIPAL UPON CONTRACTS MADE BY AN AGENT. 

G ftonss^wi* srfMfr ft ITIC ,i 

1707. In general. In dealing with the liability of the principal 
upon contracts made by his agent, there must be deemed to be in- 
cluded not only the making of the contracts but the alteration, modifica- 
tion or termination of them, the performing and receiving performance 
of them, and the various other acts which are incidental to the contract 
relation. 

As has already been suggested, in view of one of the peculiar situa- 
tions in the law of agency, the questions must be considered not only 
in relation to a disclosed principal but also to an undisclosed principal. 

For the purpose of disposing of the general before the particular, the 
case of the disclosed principal will be considered first. 

1. The Contractual Liability of the Disclosed Principal. 

1708. In general. The case in which the principal is disclosed 
at the time of making the contract or doing the act is the usual and 
typical one. To this case the great majority of the rules and principles 
of the subject are directed, although, as will be seen many of them 
apply equally to the case of the undisclosed principal where he is liable 
at all. It is fitting therefore to consider them at the outset. 

1709. Principal liable on contracts made in his name by his 
authority. Beginning with the simplest aspects, it may be noted 
that the principal is liable on all lawful contracts made in his name by 
his agent acting within the scope of his authority. This is the normal 
and typical case, and to this case the general rules of agency have their 
fullest application. 

In this case the agent is not liable and cannot be held even though 
the principal fails, or is unable, to perform. The contract is made in 
the principal's name and not in the agent's, and no liability on the part 
of the agent can arise upon the contract. The contract, by the hypo- 
thesis, is made with the principal's authority, and there is therefore 
no room for liability on the part of the agent based either upon deceit 
or on any warranty of authority. 

1300 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I?!, 17 M 



The principal is also liable to the same extent upon contracts made 
by his authority in a name adopted as the principal's trade name. 1 

1710. Principal liable on informal contracts not expressly charg- 
ing agent's responsibility. The principal is also liable on all in- 
formal contracts entered into on. his account and by his authority and 
not expressly made on the agent's responsibility rather than the prin- 
cipal's. 2 The contract is, by the hypothesis, made on the principal's 
account and by his authority ; and it should naturally and normally be 
the principal's contract. It is, however, true, as has been seen, 3 thai 
an authorized agent may, intentionally or unintentionally, charge his 
own personal responsibility rather than that of his principal ; but, as 
has also been seen, 4 where a person is known to be acting as the agent 
of a disclosed principal the presumption is that the principal and not 
the agent is to be bound, and the burden of proof is upon him whc 
alleges that the agent pledged his own responsibility. 

The rule of liability in this case is simple and just. An agent is 
sent, for example, to buy goods. He discloses his agency and the 
name of his principal. After examination and negotiation, he says, 
"I will take these goods at this price," etc. Whom does he bind? 
Who is "I" in such a case? Obviously his principal, unless the con- 
trary is clearly indicated- either by some express agreement or by a 
course of dealing. Ordinary business is too informally done to re- 
quire that the person known to be acting as agent of a known principal 
shall constantly reiterate that he is speaking for his principal and not 
for himself. 

1711. - Informal entries or charges against agent not con- 
clusive. The fact that, in such a case, goods are charged to the 
agent or bills or other memoranda are made out in his name, is not 
conclusive that the credit was not given to the principal. These charges 
or entries may be merely informal and for the purpose of identification 
or to serve until more formal and regular entries can be made. Unless 
some one has been reasonably mislead by them to his prejudice, they 
are inconclusive. 8 

i Sec Conroe v. Case, 79 Wis. 338, Y.), 252; Owen v. Gooch, 2 Esp. 567; 

Where the principal was doing busl- Ex parte Hartop, 12 Ves. 349; Rob- 

ness in a name which was formerly Ins v. Bridge, 3 M. & W. 114. 

the business name of the agents. 3 See ante, 1405. 

3 Whitney v. Wyman, 101 U. S. 392, * See ante, 1422. 

25 L,. Ed. 1050; Bonynge v. Field, 81 Guest v. Burlington Opera House 

N. Y. 159; Covell v. Hart, 14 Hun (N. Co., 74 Iowa, 457. 

1301 

op, ot 



1712,1713] THE LAW OF AGENCY [BOOK IV 

1712. Principal may often be liable though agent also bound. 
The principal, moreover, may often be liable though the agent is also 
bound. The agent, by special agreement, may bind himself jointly 
with the principal. 6 He may also, in the same manner, make himself 
a surety for his principal. But entirely outside of these forms of bar- 
gaining, it is also possible for both principal and agent to be liable. 
This is true, as seen in the preceding subdivision, where the principal 
was undisclosed at the time of the bargaining ; but it may also be true 
where both were then known, though the theory of liability is differ- 
ent. Where the principal is known and the agent is known to be act- 
ing for him, it is, as has been seen, 7 the presumption that the principal, 
and the principal alone, is to be bound. But the agent may pledge his 
own responsibility ; and he may do so in two ways : either instead of 
his principal's, or in addition to his principal's. 

1713. Written contract in agent's name Principal not 

liable. Where, when the principal is known at the time of the bar- 
gaining, the written obligation of the agent is taken, it is often said that 
this amounts to an election to give the credit to the agent and not to 
the principal, and that the latter can therefore not be held.* This 
case, it is said, is unlike the case of the undisclosed principal. There 
the obligation of the agent is taken because no principal is known to 
exist; but when, later, the existence of the principal is discovered, the 
law gives the other party the right to choose between them. Here, it 
is said, both parties are known at the time of making the contract, and 
the other party by taking the agent's obligation elects in the first in- 
stance to rely upon him rather than upon the principal. It also vio- 
lates the rule of evidence, it is urged, to permit a party [the principal] 

See ante, 1419. is implied in the terms of the propo 
i See ante, 1422. sition that a party may pursue an 
s Chandler v. Coe (1874), 54 N. H. undisclosed principal; and, indeed, 
561, 22 Am. Rep. 437; Ferguson v. the rule is elementary, neither need- 
McBean, 91 Cal. 63, 14 L. R. A. 65; ing nor permitting citation of au- 
Gillig v. Lake Bigler Road Co., 2 Nev. thority in its support." 
214. Where money was loaned upon the 
In Matter of Bateman, 7 Misc. 633, note of the agent, endorsed by the 
it is said: "Where a party contracts person now claimed to have been an 
with an agent as such, in ignorance undisclosed principal, it was held 
of the existence of a principal, he that there was no room for the doc- 
may, on discovering the principal, trine of the undisclosed principal and 
elect to hold him. But, if he know the liability of the parties as fixed by 
the principal at the time of the co' the contract could pot be changed, 
tract, and yet chooses to engage with Brown v. Tainter, 114 N. Y. App. Div. 
the agent, he is estopped afterward 446. 
to go against the principal. So much 

1302 



CHAP. V] LIAPILITY OF PRINCIPAL TO THIRD PARTIES [ 1714 

to be charged upon a contract in writing made with knowledge of his 
existence yet containing no word showing an intention to bind him. 
Thus it was said by the court in New Hampshire. 9 "We are of opin- 
ion that where a principal is sought to be charged upon a contract in 
writing, made in the name of his agent, the rule of evidence, which 
prohibits the parties to a written contract from contradicting or vary- 
ing its terms by parol testimony, applies if the principal was known, 
but not if he was unknown." A number of cases have adopted this 
view. 

1714. Same subject Principal liable. Notwithstanding 

these cases, however, there is excellent authority for the position that 
the principal also may be held in such a case. It does not violate the 
parol evidence rule, it is replied, because the effect is not to release the 
agent but simply to add the liability of the principal. Taking the ob- 
ligation of the agent may be evidence of election it is conceded ; but it 
is urged that it is not conclusive and should ordinarily be a question for 
the jury. The leading case on this side is Calder v. Dobell, 10 decided 
in 1871, by the English court of common pleas and the exchequer 
chamber. It appeared that one Cherry, a broker, had proposed to the 
defendant, a Liverpool merchant, to buy cotton "to arrive," and the 
defendant had authorized Cherry to buy 100 bales for him but declined 
to allow his name to appear in the transaction. Cherry offered to buy 
the cotton of the plaintiffs but they refused to trust him, and he, being 
pressed, disclosed the name of the defendant as his principal. A writ- 
ten contract was then entered into between plaintiffs and Cherry, in 
which Cherry alone was named as the buyer and which he signed in 
his own name without any reference in the contract to the fact that he 
was acting for another. An invoice was later made in Cherry's name, 
he was charged with the cotton on plaintiffs' books and when the cot- 
ton arrived he was repeatedly asked to accept and pay for it. He* 
failed to do so, and, the price of cotton having fallen, an action for 
damages was brought against the defendant. It was urged at the trial 
that the taking of the contract in Cherry's name was a conclusive elec- 
tion to hold him only, but the trial judge left the question of election 
to the jury and the jury found for the plaintiffs. Against this action 
appeal was taken. Four judges in the common pleas gave opinions, 
all in favor of affirmance. A variety of views were expressed but all 
agreed that the matter of election was for the jury. Montague-Smith, 

Chandler v. Coe. supra. 486. See other quotations from this 

10 Calder v. Dobell, L. R. 6 C. P. case ante, 1420, note 20. 

lyoit 



1715] THE LAW OF AGENCY [BOOK IV 

J., said of the contention that the entering into the contract in Cherry's 
own name was conclusive evidence of an election to hold him alone as 
the principal : "I agree that it was strong evidence ; but, if the parol 
evidence [that defendant had authorized the purchase] was admissible, 
it shows what the real transaction between the parties was. Being 
employed to buy cotton for the defendant, with, an injunction not to 
allow the defendant's name to appear, Cherry buys in his own name; 
but the sellers, for reasons of their own, insisting upon knowing who 
the principal was. Cherry, disregarding his instructions in that respect, 
disclosed the defendant's name. The plaintiffs required the principal's 
name, with a view of fixing him ; but, because he desired that his name 
should not appear, the contract was made out in the name of the agent. 
The plaintiffs clearly never intended to make the bargain with Cherry 
alone. At all events, it was a question for the jury." This judgment 
was affirmed by the exchequer chamber, all the judges regarding it as 
a question of election not conclusively determined by the form of the 
contract. This case undoubtedly has some peculiar features, but the 
same doctrine has been applied in cases which did not have them. 

1715. Thus in Byington v. Simpson " decided in 1883 

by the supreme court of Massachusetts the suit was to recover a bal- 
ance due under a building contract. The contract was in writing and 
purported on its face to be made by the plaintiffs with J. B. Simpson. 
It provided that the work should be done under the direction of J. B, 
Simpson, agent, and was signed "J. B. Simpson, agent." J. B. Simp- 
son was in fact contracting as agent for the defendant, his wife, and 
this was known to the plaintiffs at the time the contract was made. It 
was contended that inasmuch as the plaintiffs knew the principal and 
yet were contented to accept a written contract which on its face bound 
the agent they must be taken to have dealt with, and to have given 
credit to, the agent alone. But the court said: "We are of opinion 
that the plaintiffs' knowledge does not make their case any weaker 
than it would have been without it. Whatever the original merits of 
the rule, that a party not mentioned in a simple contract in writing may 
be charged as a principal upon oral evidence, even where the writing 
gives no indication of an intent to bind any other person than the 
signer, we cannot reopen it, for it is as well settled as any part of the 
law of agency. And it is evident that words which are sufficient on 
their face, by established law, to bind a principal, if one exists, cannot 

11 Byington v. Simpson, 134 Mass. Merrell v. Witherby, 120 Ala. 418, 74 
169, 45 Am. Rep. 314. See also, York Am. St. Rep. 39. 
County Bank v. Stein, 24 Md. 447; 

1304 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1716 



be deprived of their force by the circumstance that the other party re- 
lied upon their sufficiency for that purpose. Yet that is what the de- 
fendant's argument comes to. For the same parol evidence that shows 
the plaintiffs' knowledge of the agency may warrant the inference that 
the plaintiffs meant to have the benefit of it, and to bind the principal." 

1716. - Conceding that the other party's election is not 
conclusively determined by taking the written contract of the agent, 
his situation seems to be thenceforward like that of one who has dealt 
with the agent of an undisclosed principal he would not lose his right 
to proceed against the principal merely by conduct showing an inten- 
tion to preserve his rights against the agent and not amounting to a 
discharge or merger of the claim. 12 Thus in Calder v. Dobell it was 
suggested that the other party might sue either principal or agent, and 
that there would be no conclusive election unless he had sued to judg- 
ment. 

The doctrine of Calder v. Dobell would doubtless be also subject to 
the qualification that the written contract made in the name of the 
agent was not an instrument under seal or a negotiable instrument. 



12 In Cross v. Matthews (K. B. 
Div.), 91 Law Times Rep. 500, it 
appeared that the plaintiffs sued M. 
and W. jointly. M. did not appear, 
and plaintiffs entered a judgment by 
default against him. When the case 
came on for . trial against W. it 
appeared that M. was simply W.'s 
agent, and that the credit was really 
given W., although the invoices had 
been made out in the name of M. 
W. objected to judgment against him- 
self upon the ground that the plain- 
tiffs had already elected by taking 
judgment against M. Against W.'s 
objection the judgment against M. 
was set aside, and upon the hearing, 
judgment was rendered against W. 
On appeal this was held to be er- 
roneous, the court saying that the 
taking of Judgment against M. 
"showed an election on the part of 
the plaintiffs to accept the liability 
of the agent." Hammond v. Scho 
field, [1891] 1 Q. B. 453, was cited to 



the point that the effect of taking 
judgment could not be obviated by 
subsequently setting aside that judg- 
ment upon the consent of the defend- 
ant therein only. 

In Wilson v. Blanck, [1909] Trans- 
vaal L. R., the plaintiff, who had fur- 
nished goods upon the order of de- 
fendant's agent, sued the agent and 
recovered in the lower court upon 
the theory that the agent had pledged 
his own credit. Upon appeal it was 
held that he had not pledged his 
own credit, and the judgment against 
him was reversed. Plaintiff then 
sued this defendant, and was held 
entitled to recover. It was held that 
the doctrine of election did not apply 
because the result in the other case 
showed that plaintiff never had any 
claim against the agent, and the 
mere prosecution of an unsuccessful 
action in which no judgment could 
legally be obtained, did not constitute 
an election. 



1305 



(8 .Y . T / 8Si 



I7I7~ I 7 I 9] THE LAW OF AGENCY [BOOK IV 

1717. Principal not liable where credit given exclusively to 
agent. As has already been pointed out, 13 it is entirely possible 
that a known agent may pledge his own responsibility, and that the 
contract, although made for the benefit of the principal, shall be made 
solely and exclusively on the credit of the agent. Where this is the 
situation, the principal cannot be held upon the contract. 14 Whether 
the credit was thus given exclusively to the agent, is, as has been seen, 
ordinarily a question of fact to be determined in the light of all the 
circumstances of the case. 15 In two particular classes of cases, how- 
ever, already frequently referred to, namely, the case of the negotiable 
instrument and the instrument under seal, the question is determined 
by the established rule that no one can be charged upon the contract 
except the one who upon its face appears to be the party to it. 16 

1718. For what contracts and contractual acts of agent is prin- 
cipal liable. With this much of preliminary discussion, the ques- 
tion next arises, for what particular contracts and contractual acts is 
the principal responsible. A detailed answer to this question is here 
impracticable. All that has gone before has been designed to aid in 
its solution. How authority is conferred," how it is to be interpreted 
and construed. 18 how it is to be executed, 19 and especially what acts 
and contracts fall within or without the scope of particular authori- 
ties, 20 have already been considered at much length. The only thing 
which is practicable here is to refer back to those discussions, and to 
recall to mind some of the more general principles which must always 
be taken into account when endeavoring to solve a particular problem. 
In the field of these general principles, those which follow are perhaps 
the most important. 

1719. Qui facit per alium, facit per se. It is the fundamental 
principle of the law of agency, that what one person does for and by 
the authority of another is to be considered as the act of that other. 
The principle has taken the form of the familiar maxim Qui facit per 
alium, facit per se. That this should be so, is an obvious natural and 
moral necessity as well as a legal one, founded upon manifest doctrines 
of good faith and moral and legal responsibility. The law of agency, 



is See ante, 419. Lynch, 31 N. Y. Misc. 724; Lament 

**See Paterson v. Gandasequi, 15 v. Hamilton, [1907] Scotch S. C. 628. 

East, 62; Addison v. Gandasequi, 4 See ante, 1422 et seg. 

Taunt. 574; Hazelhurst Lumber Co. i See ante, 1425; post, 1734. 

v. Carlisle Mfg. Co., 130 Ky. 1; Silver 17 See ante, 209-253. 

v. Jordan, 136 Mass. 319; Perkins v. See ante, 764-793. 

Cady, 111 Mass. 318; Burns v. Royal 19 See ante, 1079-1183. 

Bank, 128 N. Y. Supp. 723; Davis v. 20 See ante, 794-1078. 

1306 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I72O, 1721 

however, is wider than this maxim. For the principal is liable in many 
cases, especially of tort, in which he can not be deemed to have author- 
ized or intended the act. On the other hand, that the maxim is not a 
principle of unlimited application in the law of agency, has already 
been shown. 21 It is not every act done by one person for another which 
is binding upon the latter. The act done must have been a lawful one, 
done in the name and behalf of that other, and by his express or im- 
plied authority. What acts are lawful to be done by an agent have 
been determined. 22 

1720. Principal liable for acts and contracts within scope of 
authority. Out of these principles, however, grows the general rule 
that the lawful acts and contracts of the agent, done or made for the 
principal and in his behalf, are binding upon the principal, if so done 
or made by the agent while he was acting in the course of his under- 
taking and within the real or apparent scope of his authority, 23 or if 
they have subsequently, with full knowledge of the facts, been ratified 
and confirmed by the principal. 24 

The converse of this rule follows as a necessary consequence. If 
the act done or contract made was not a lawful one, the law, as has 
been seen, will not enforce it. 23 If the agent acted for himself and in 
his own behalf instead of for his principal, and the other party with full 
knowledge so dealt with him, the principal is not liable. 26 If the agent 
were not acting in the course of his principal's business, but was acting 
entirely outside of that, and for some purpose of his own, the act is not 
the principal's, unless he has adopted it. If the act done or contract 
made was not within the scope of his authority, but exceeded or dis- 
regarded it, then no liability attaches to the principal, unless he volun- 
tarily affirms and ratifies it. 

1721. Third person must ascertain agent's authority. Every 
person dealing with an assumed agent is bound, at his peril as pre- 
viously explained, to ascertain the nature and extent of the agent's 
authority. The very fact that the agent assumes to exercise a dele- 
gated authority is sufficient to put the person dealing with him upon 
his guard, to satisfy himself that the agent really possesses the pre- 
tended authority. 27 

21 See ante, 80, 81. 28 See ante, 1419 et seq. 

22 See ante, 79-126. 27 See ante, 743. Jacobs v. MOT- 

23 Ante, 275-291. ris, [1902] 1 Ch. 816; Forman v. The 

24 See Book I, Chap. V, Of Ratifica- Liddesdale, [19001 App. Gas. 190; 
tion. Wigaud v. De Wertheimer, 35 Can. 

25 See ante, 275-291. Super. 436. 

O7 



1722,1723] THE LAW OF AGENCY [BOOK IV 

If, having relied upon it, he seeks to hold the alleged principal re- 
sponsible, he must be prepared to prove, if either be denied, not only 
that the agency existed, but that the agent had the authority which he 
exercised. 28 

But as has been frequently pointed out, it is not essential that an 
actual authority existing should have been known and specifically re- 
lied upon at the time. If it existed, it may be proved, although the 
other party did not then rely upon it. 29 

1722. What constitutes authority. An attempt has been made 
in an earlier portion of the work to show what constitutes authority. 
It has been seen that it is a composite matter into which a number of 
different elements may enter. 80 All authority emanates from the prin- 
cipal, who may in general confer as little or as much as suits his pur- 
poses, and unless an alleged authority can be traced home to him as its 
author and its source, it can not operate against him. It rests upon 
his will and intention. That will and intention may find expression in 
words, but it may also be declared by conduct. The authority of the 
agent, then, so far as third persons are concerned, is as broad not only 
as the words of the principal, but as broad also as his acts and conduct. 
In other phrase, it is, so far as third persons are concerned, as broad 
as the principal has made it appear to be. 31 As respects the mutual 
rights and dealings of the principal and agent, the actual authority 
may govern ; but as respects the liability of the principal to third per- 
sons for the acts and contracts of the agent, it is the apparent authority 
in the sense previously explained, which controls. This apparent au- 
thority may be the result of the principal's negligent act of his omis- 
sion, silence, or acquiescence. 32 Every person is presumed by law to 
contemplate and intend the natural and proximate results of his own 
acts, and he cannot avoid them by asserting that he did not really in- 
tend or contemplate them. If the principal leads third persons, acting 
reasonably and in good faith, to believe that his agent possesses a cer- 
tain authority, then, as to them, the principal will be estopped to deny 
that the agent does possess it. 33 

1723. Secret instructions and restrictions of principal, 

or secret motives of agent Mistakes of agent. As has been seen, 

- See ante, 745. Hambro v. Burn- ^> See ante, 728. 
and, [1903] 2 K. B. 399, s. c., [1904] 2 ^ See ante, 710. 

K. B. 10. 32 See ante, 720. 

20 See ante, 744. See Hambro v. s 3 See ante, 245, 722. 
Burnand, [1904] 2 K. B. 10, and par- 
ticularly the opinion of Romer, L. J. 

1308 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1723 

however, the agent's authority is not unlimited. The principal may 
impose upon it as many limitations and restrictions as he thinks best, 
and these limitations and restrictions are binding upon third persons if 
they have knowledge or are charged with notice of them. The prin- 
cipal cannot, however, expect third persons to have notice of limita- 
tions and restrictions which are in their nature secret and undisclosed. 
And while, as has been stated, persons dealing with the agent are bound 
to know the extent of his authority, they may reasonably take the vis- 
ible and apparent interpretation of that authority by the principal him- 
self as the true one, and as the one by which he chooses to be bound. 
It is therefore the rule of the law that the rights of third parties, who 
have reasonably and in good faith relied upon the apparent authority 
of the agent, as previously explained, cannot be prejudiced by secret 
limitations or restrictions upon it of which they had no notice. 3 * 

So where the act of the agent is apparently within the terms of an 
express authority, the principal may be bound, although the agent, 
unknown to the party dealing with him, is secretly engaged in abusing 
his authority, or has a secret motive to divert the authority to per- 
sonal or other illegitimate ends. 35 

3* See ante, 710. such act is binding on the constituent 

35 Thus in Hambro v. Burnand, as to all persons dealing in good faith 

[1904] 2 K. B. 10, it was held by the with the agent. Such persons are 

English court of appeal, reversing not bound to inquire into facts 

s. o., [1903] 2 K. B. 399, that where aliuntie. The apparent authority is 

an agent had written authority to is- the real authority." (This had also 

sue underwriting policies, his princi- been approved by the Privy Council, 

pals were liable on policies of the in the case of a bill of exchange, in 

sort authorized and apparently regu- Bryant v. Quebec Bank, [1893] App. 

lar, although he was secretly abusing Gas. 170, 180.) 

his power because the policies were The court thought the case distin- 
issued for the benefit of an in- guishable from such cases as Grant 
solvent concern in which the agent v. Norway, 10 C. B. 665; Whitechurch 
was personally interested. The court v. Cavanagh, [1902] App. Gas. 117; 
cited and relied upon the New York and British Mut. Bank Co. v. Charn- 
cases of North River Bank v. Aymar, wood Forest Ry. Co., 18 Q. B. Div. 
3 Hill, 262, and President, etc., v. 714. Romer, L. J., referred to them 
Cornen, 37 N. Y. 320 cases of promis- as cases of master and servant, in- 
sory notes and quoted with approv- volving implied rather than formal 
al the rule approved by Cowen, J., that written authority. "They have noth- 
"Whenever the very act of the agent ing to do with a case where there is 
is authorized by the terms of the an express authority in writing." 
power, that is, whenever by compar- Mathew, L. J., held that when plain- 
ing the act done by the agent with tiffs saw that the written authority 
the words of the power, the act la was sufficient, they were not bound to 
in itself warranted by the terms used, inquire into his .motives, where there 

1309 



I724-I7 2 6] <i CJflTHE LAW OF AGENCY, /TIJIH [BOOK IV 

So where the agent was authorized to act, the mere fact that he 
acted mistakenly, that he erred in judgment, sold for too low a price, 
paid too much, sold too soon or too late, granted too liberal terms, 
selected the wrong article, did not sufficiently safe-guard the princi- 
pal's interest, made or accepted offers contrary to his real intention, 
and the like, where the other party was innocent and ignorant of the 
mistake, will not ordinarily release the principal, 88 

1724. General and special agents. These principles apply to 
all agents whether they be general or special. It is true, of course, 
that the scope of the general agent's authority is, from the very nature 
of the case, wider and more flexible than that of the special agent. 
The latter is essentially and necessarily limited and restricted. In the 
former case, particular instructions are unusual ; in the latter, they are 
expected. In each case the actual authority will be the determining 
authority, unless the principal gives to it the appearance of a wider 
scope. In neither case can the apparent authority be controlled by 
secret limitations. The true distinction between general and special 
agents lies, as has been stated, in this, that the apparent scope of the 
special authority is naturally and necessarily a limited one. Of these 
limitations, its very nature gives peculiar warning to which the persons 
interested must give heed. 3T 

1725. Special agent's authority must be strictly pursued. 

When, therefore, it is said that the act of the agent must be within 
the scope of his authority in order to be binding upon the principal, the 
statement applies alike to general and special agents. None the less 
true on this account, however, is the well settled and often asserted 
rule that the authority of the special agent must be strictly pursued. 
It is in its nature limited, and these limits may not be exceeded. 88 

1726. Effect of ratification. Although the agent may have acted 
beyond the scope of his authority, or may have acted without any au- 
thority at all, the principal may yet subsequently see fit to recognize 

was nothing to arouse suspicion. Col- (N. Y.), 194; Comer v. Granniss, 75 

line, M. R., thought the case covered Ga. 277; Borden v. Richmond, etc., R. 

by the case of Bryant v. Quebec Co., 113 N. Car. 570, 37 Am. St. Rep. 

Bank, supra, and since the bill there 632; Natcher v. Natcher, 47 Pa. 496; 

was signed per proc., he thought that Hasbrouck v. Western Un. Tel. Co., 

the fact that that was a negotiable in- 107 Iowa, 160, 70 Am. St. Rep. 181; 

strument was immaterial. See also, Beaufort v. Neeld, 12 Cl. & F. 248. 
Rainey v. Potter, 57 C. C. A. 113, 120 ST See ante, 739. 
Fed. 651; Lysaght v. Falk, 2 Comw. ss See ante, 742. Russo-Chinese 

L. R. (Australia) 421. Bank v. Sam, [1910] App. Cas. 174. 
See Levy v. Terwilliger, 10 Daly 

1310 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/27, 1728 



and adopt the act as his own. This recognition and adoption is termed 
ratification, the doctrine of which has been hereinbefore discussed. 
By such ratification, as has there been seen, the principal accepts the 
act with its burdens and responsibilities precisely as though he had 
previously authorized it. 39 

1727. Performance of unlawful act not enforced. No contract 
for the performance of an act which is either illegal in itself or which 
ts opposed to public policy, will be enforced. No authority to make 
any such contract or to perform any such act can, as has been seen, 40 ' 
be lawfully delegated. And even though the agent deeming himself 
authorized should perform the act or execute the contract with all 
formalities, yet such performance or such contract will furnish no 
ground of action. The law, in general, leaves all such parties where 
it finds them.* 1 

1728. Principal not bound where agent had an adverse interest. 
As has been seen, the principal is entitled to demand and receive from 
the agent a loyal, zealous and disinterested service. He presump- 
tively contracts for the exercise of all the agent's skill, knowledge and 
ability in his own behalf and for his own advantage, and the policy of 
the law will not tolerate the existence of a secret and undisclosed in- 
terest in the agent antagonistic to that of his principal, on account of 
the temptation offered to the agent to sacrifice the principal's interest 
to his own. The principal may, if he sees fit, intrust his interests in 
the hands of an agent whom he knows to also have an interest in the 
same transaction which is or may be adverse to his own. But this is 
not to be presumed, and it must appear that the interest of the agent 
was fully and fairly disclosed to the principal. 42 

Where, therefore, the agent while ostensibly acting only for his 
principal, is secretly acting as the agent of the other party, or is him- 
self the other party, the acts done or contracts made by him will not 
be binding upon the principal if he sees fit to repudiate them.* 3 

This rule is frequently applied to the case of the agent who, while 
apparently acting only for his principal in the purchase or sale of prop- 

39 See ante, Chapter on RATIFICA- neau, 1 Wis. 151, 60 Am. Dec. 368; 

TION. Switzer v. Skiles, 3 Gilm. (111.) 529, 

*o See ante, 82 et seg. 44 Am. Dec. 723; Harrison v. Mc- 

41 See ante, 83. Henry, 9 Ga. 164, 52 Am. Dec. 435. 

42 See ante, 1188 et seg. Bartram A fortiori where the other party ha& 
v. Lloyd, 90 Li. T. Rep. 357. bribed the agent. Shipway v. Broad- 

43Wassell v. Reardon, 11 Ark. 705, wood, [1899] 1 Q. B. 369. See also,. 
54 Am. Dec. 245; Herman v. Marti- post. 3037 et seq. 

1311 



1729] THE LAW OF AGENCY [BOOK IV 

erty, is, in reality, acting under the commission of the contemplated 
purchaser or seller, and more often, to the case of the agent who, being 
authorized to sell or buy property for the principal, secretly sells to or 
buys of himself. 

2. The Contractual Liability of an Undisclosed Principal. 

1729. Preliminary considerations as to liability. It is ordi- 
narily to the interest, as it is usually the duty, of an agent in making 
contracts for his principal to full)- disclose the fact of the agency and 
to make the contract in the name and on the account of the principal. 
It often happens, however, that the agent will either intentionally or 
unintentionally omit to do this. He may (i) disclose that he has a 
principal but conceal his name and identity ; or he may (2) wholly con- 
ceal the fact that he is an agent and contract as though he were him- 
self the principal in the transaction. In either of these cases the agent 
usually makes himself personally liable upon the contract. In the 
second case the liability of the agent is ordinarily clear, because no 
other person being known in the transaction, the agent is the one upon 
whom the liability directly rests. In the first case also the agent may 
be liable because, though disclosing the fact that he has a principal, 
but concealing his name, he may be held to have pledged his own re- 
sponsibility.** 

Conceding that the agent thus is, or may be, liable upon the con- 
tract, the- question arises whether the principal, if discovered, may be 
held liable upon it also. In favor of such a liability it may be urged 
that in as much as there is a principal in the transaction who has au- 
thorized' the contract to be made and who is entitled to its benefit, the 
principal should be held liable upon the contract when he is discovered. 
Inasmuch as the principal must ordinarily settle with some one, being 
liable to the agent, perhaps upon an express contract of indemnity or 
reimbursement, or upon an implied one wherever the non-disclosure 
of the principal and the pledging of the agent's own credit do not con- 
stitute such a violation of duty as to disentitle the agent to such re- 
lief, 45 it seems to be a convenient "short-cut," if nothing more, to 
give the third party a direct claim upon the principal instead of re- 
quiring him to pursue the agent who will then pursue the principal. 
Where this is attempted before the principal has paid or settled with 

One cannot be held as an undis- time. Brown v. Tainter, 114 N. Y. 
closed principal whose relation to App. Div. 446. 
the transaction was known at the gee ante, 1601 et seq. 

1312 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I73O, 173! 

agent, and this seems to have been the 'typical case in the first in- 
stances, nothing but more or less technical rules of procedure would 
seem to stand in the way of it. Although in theory such an action 
might be regarded as founded upon some right of the third party to be 
subrogated to the agent's claim upon the principal, in practical effect 
it would be likely to come to be looked upon as a direct right of the 
third party against the principal upon the contract. 

1730. Against such a liability it may be urged (i) that 

it is contrary to the general principles of contract to permit a person 
to be bound upon a contract who does not appear to be a party to it, 
and (2) that, in the case where no principal was known to exist, the 
effect of such a rule is to give to the other party the benefit of a liabil- 
ity which he did not contemplate at the time of making the contract 
and for which he did not stipulate. A right to hold the undisclosed 
principal in such a case would, as was pointed out by a distinguished 
English judge, come to the other party as a mere "God-send." 

Whatever may be thought where the contract is informal and oral, 
it is certain that where the contract is in writing and especially where 
it contains no intimation of. the existence of a principal, a rational 
theory for the principal's liability is not easy to discover. The con- 
tract is in the name and over the signature of the agent. How can 
that name and signature be treated as the name and signature of the 
principal? If the agent also could not be held upon it, it might then 
be said that the agent's name had, for the time being, been adopted as 
the business name of the principal, and was therefore, in this case, the 
name of the principal. 46 But if the agent is to be held liable also be- 
cause it is his name, how can the principal be held upon the theory that 
the name used is not the agent's name but the business name of the 
principal ? May the same be, at the same time, the actual name of the 
agent and the trade name of the principal? 

A theory of the legal identification of the principal with the agent 
leads to the same result. If the principal and the agent are legally one 
and that one the principal, it may not be difficult to see that the con- 
tract is the principal's contract, but it is not easy to see how the con- 
tract is also the contract of the agent. 

1731. General rule Undisclosed principal liable when discov- 
ered. Notwithstanding these objections, the considerations mak- 
ing for the principal's liability have generally prevailed under Eng- 
lish law, though not under the Continental systems, and it is unques- 

4 See Isham v. Burgett, 157 Mass. 546. 
83 



THE LAW OF AGENCY 



[BOOK iv 



.tionably the general rule of our law that an undisclosed principal, when 
subsequently discovered, may, at the election of the other party, if 
exercised within a reasonable time, be held liable upon all simple non- 
negotiable contracts made in his behalf by his duly authorized agent, 
although the contract was originally made with the agent in entire 
ignorance of the principal.* 7 



*f Mississippi Valley Co. v. Abeles, 
87 Ark. 374; Bryant Lumber Co. v. 
Crist, 87 Ark. 434; Merrill v. Ken- 
yon, 48 Conn. 314; Appeal of National 
Shoe & Leather Bank, 55 Conn. 469; 
Dashaway Ass'n v. Rogers, 79 Cal. 
211; Curran v. Holland, 141 Cal. 437; 
Simpson v. Patapsco Guano Co., 99 
Ga. 168; Baldwin v. Garrett, 111 Ga. 
876 (but the matter is regulated by 
the Code, 3024); Guest v. Burling- 
ton Opera House Co., 74 Iowa, 457; 
Steele-Smith Grocery Co. v. Potthast, 
109 Iowa, 413; Edwards v. Gildemei- 
ster, 61 Kan. 141; Jones v. Johnson, 
86 Ky. 530; Ware v. Long, 24 Ky. 
Law Rep. 696; Cecil v. Citizens' Nat. 
Bank, 145 Ky. 842; Hyde v. Wolf, 4 
La. 234, 23 Am. Dec. 484; Maxcy 
Mfg. Co. v. Burnham, 89 Me. 538, 56 
Am. St. Rep. 436; Henderson v. May- 
hew, 2 Gill (Md.), 393, 41 Am. Dec. 
434; Mayhew v. Graham, 4 Gill 
(Md.), 339; Tobin v. Larkin, 183 
Mass. 389; Schendel v. Stevenson, 153 
Mass. 351; Hunter v. Giddings, 97 
Mass. 41, 93 Am. Dec. 54; Exchange 
Bank v. Rice, 107 Mass. 37, 9 Am. Rep. 
1; Byington v. Simpson, 134 Mass. 
169, 45 Am. Rep. 314; Huntington v. 
Knox, 7 Cush. (Mass.) 371; Eastern 
R. R. Co. v. Benedicts Gray (Mass.), 
561, 66 Am. Dec. 384; Lerned v. Johns, 
9 Allen (Mass.), 419; Nat'l Ins. Co. v. 
Allen, 116 Mass. 398; Schweyer v. 
Jones, 152 Mich. 241; Lindeke Land 
Co. v. Levy, 76 Minn. 364 (Rowell v. 
Oleson, 32 Minn. 288, overruled); 
Simmons Hdw. Co. v. Todd, 79 Miss. 
163; Weber v. Collins, 139 Mo. 501; 
Lamb v. Thompson, 31 Neb. 448; 
Grrenburg v. Palmleri, 71 N. J. L. 83; 
Elliott v. Bodine, 59 N. J. L. 567; 
Yates v. Repetto, 65 N. J. L. 294; 



Borcherling v. Katz, 37 N. J. Eq. 150; 
Jennings v. Davies, 29 App. Div. 227; 
Taintor v. Prendersrast, 3 Hill (N. 
Y.), 72, 38 Am. Deo. 618; Briggs v. 
Partridge, 64 N. Y. 357, 21 Am. Rep. 
617; Cobb v. Knapp, 71 N. Y. 348, 27 
Am. Rep. 51; Inglehart v. Thousand 
Islands Hotel Co., 7 Hun (N. Y.), 
547; Coleman v. First Nat'l, 53 N. Y, 
388; Dykers v. Townsend, 24 N. Y. 57; 
Meeker v. Claghorn, 44 N. Y. 319; 
Jessup v. Steurer, 75 N. Y. 613; 
Adolff v. Schmitt, 13 Misc. 623; Davis 
v. Lynch, 31 Misc. 724; City Trust 
Co. v. Amer. Brew. Co., 174 N. Y. 
486; Patrick v. Grand Forks Merc. 
Co., 13 N. D. 12; Harper v. Tiffin Nat'l 
Bank, 54 Ohio St. 425: Smith V. 
Plummer, 5 Whart. (Penn.) 89, 34 
Am. Dec. 530; Hubbert v. Borden, 6 
Whart. (Penn.) 79; Rice v. Fidelity 
& Casualty Co., 1 Lack. Leg. News 
(Penn.) Ill; Episcopal Church v. 
Wiley, 2 Hill (S. C.), Ch. 584, s. c., 
1 Riley (S. C.), Ch. 156, 30 Am. Dec. 
386; Waddill v. Sebree, 88 Va. 1012, 
29 Am. St. Rep. 766; Belt v. Wash- 
ington Water Power Co., 24 Wash. 
387; Pennsylvania Casualty Co. v. 
Washington Portland Cement Co., 63 
Wash. 689; Ford v. Williams, 21 How- 
ard (U. S.), 287, 16 L. Ed. 36; Moore 
v. Sun Ptg. & Pub. .Ass'n, 41 C. C. A. 
506, 101 Fed. 591; Boland v. North- 
western Fuel Co., 34 Fed. 523; Hig- 
gins v. Senior, 8 M. & W. 834; Brown- 
ing v. Provincial Ins. Co., L. R. 5 
P. C. App. 263; Calder v. Do'^ell, L. 
R. 6 C. P. 486; Trueman v. Loder, 11 
A. & E. 589; Smethurst v. Mitchell, 
1 E. & E. 622; Thomson v. Davenport, 
9 B. & C. 78. (This list does not 
purport to be complete.) 



CHAP. V] 



LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1732 



The rule applies not only where the principal has in fact received the 
benefits of the contract, but also where the contract still remains ex- 
ecutory. 48 

The rule itself is doubtless an anomaly, but even so it is undoubtedly 
as well settled as any other rule in the law of agency. 49 

1732. Rule applies to all simple contracts. This general rule 
imposing obligation upon the undisclosed principal when discovered, 
extends to all contracts made by oral negotiation under his authority. 
It also, by the weight of authority, applies to all simple non-negotiable 
contracts in writing, entered into by an agent in his own name and 
within the scope of his authority, although the name of the principal 
does not appear in the instrument, and was not disclosed, and although 
the party dealing with the agent supposed that the latter was acting 
for himself ; so and this rule obtains as well in respect to contracts 

The same principle was applied this liability of the principal to the 

agent, thereby putting the liability 
ultimately, where it justly belongs, 
upon the principal on whose account 
the contract was made. Many prac- 
tical objections to a remedy purely 
equitable will, however, at once sug- 
gest themselves. The less familiar 
and more complicated procedure, and 
the fact that many small claims are 
not within the statutory jurisdiction 
of courts of equity, may be mentioned. 
An interesting discussion of the ques- 
tion by Professor William Draper 
Lewis, of the University of Pennsyl- 
vania, will be found in 9 Columbia 
Law Review, 116. Professor Lewis, 
after discussing the theory of subro- 
gation as an explanation of the rule, 
and suggesting but rejecting the argu- 
ment that the principal's liability 
may be founded upon the theory of 
his deceit in holding out some one- 
other than himself as the principal, 
contends that historically it is per- 
fectly consistent with the theory of 
the obligations enforced in the ac- 
tion of assumpsit that the undis- 
closed principal should be held liable, 
because he was really the one who 
caused the plaintiff to act ta his det- 
riment. 

e Briggs v. Partridge, 64 N. Y. 357, 
21 Am. Rep. 617; Dykers v. Town- 



where a corporation doing business 
under an assumed name was held for 
contracts made in that name. "An 
undisclosed principal is bound by the 
contracts of his agent acting within 
the scope of his authority, although 
the party with whom the contract was 
made may have known the principal 
under some other name." Phillips v. 
International Text Book Co., 26 Pa. 
Super. 230. 

48 See Tobin v. Larkin, 183 Mass. 
389; Lerned v. Johns, 9 Allen (Mass.), 
419; Dykers v. Townsend, 24 N. Y. 
61; Hubbert v. Borden, 6 Whart. 
(Pa.) 79; Waddill v. Sebree, 88 Va. 
1012, 29 Am. St. Rep. 766. 

Kayton v. Barnett, 116 N. Y. 625. 

In an article upon the general sub- 
ject by Professor James Barr Ames 
of Harvard in 18 Yale Law Journal, 
443, it is suggested that, instead of 
attempting to work out a rule under 
which the principal can be held di- 
rectly liable in an action at law, the 
legal liability should be held to be 
where the contract itself puts it, 
namely, upon the agent, but that then, ' 
in as much as it is the duty of the 
principal to exonerate the agent from 
the liabilities incurred on his ac- 
count, the other party should be per- 
mitted In equity to avail himself of 



1315 



1733. X 734j 



THE LAW OF AGENCY 






[BOOK iv 



which are required to be in writing, as to those to whose validity a 
writing is not essential. 61 

1733. Parol evidence to identify the principal. For the pur- 
pose of identifying the principal, parol evidence may be admitted. It 
does not violate the principle which forbids the contradiction of a writ- 
ten agreement by parol evidence, nor that which forbids the discharg- 
ing of a party by parol from the obligations of his written contract. 
The writing is not contradicted, nor is the agent discharged; the re- 
sult is, merely, that an additional party is made liable. 52 As is said by 
a learned judge in a Massachusetts case : "Whatever the original mer- 
its of the rule that a party not mentioned in a simple contract in writ- 
ing may be charged as a principal upon oral evidence, even where the 
writing gives no indication of an intent to bind any other person than 
the signer, we cannot reopen it, for it is as well settled as any part of 
the law of agency." 53 

1734. Does not apply to contracts under seal. It was a funda- 
mental principle of the common law that, upon an instrument under 
seal, those persons only can be charged who appear upon its face to 

' 

send, 24 N. Y. 61; Coleman v. First v. Coe, 54 N. H. 561, 22 Am. Rep. 437; 
Nat. Bank, 53 N. Y. 393; Ford v. 
Williams, 21 How. (U. S.) 289, 16 L. 
Ed. 36; Weber v. Collins, 139 Mo. 501; 
Waddill v. Sebree, 88 Va. 1012, 29 Am. 
St. Rep. 766; Belt v. Washington Pow- 
er Co., 24 Wash. 387. 

siTobin v. Larkin, 183 Mass. 389; 
Borcherling v. Katz, 37 N. J. Eq. 150; 
Briggs v. Partridge, supra. Compare 
Bourne v. Campbell, 21 R. I. 490, prob- 
ably wrong. 

62 Higgins v. Senior, 8 M. & W. 834; 
Huntington v. Knox, 7 Cush. (Mass.) 
371; Ford v. Williams, 21 How. (U. 
S.) 287, 16 L. Ed. 3G; Curran v. Hol- 
land, 141 Cal. 437; Pleins v. Wachen- 
heimer, 108 Minn. 342; Lindeke Land 
Co. v. Levy, 76 Minn. 364 (overrul- 
ing Rowell v. Oleson, 32 Minn. 288); 
Belt v. Washington Power Co., 24 
Wash. 387. There is language con- 
trary in a number of cases though 
they are practically all distinguish- 
able. Ferguson v. McBean, 91 Cal. 
63, 14 L. R. A. 65 (a sealed instru- 
ment) ; Gillig v. Road Co., 2 Nev. 214 
(a negotiable instrument) ; Chandler 



Heffron v. Pollard, 73 Tex. 96, 15 Am. 
St. Rep. 764; Silver v. Jordan, 136 
Mass. 319; Matter of Bateman, 7 N. Y. 
Misc. 633; Brown v. Tainter, 114 N. 
Y. App. Div. 446, sometimes referred 
to, were cases of a disclosed principal 
and involved a different question, else- 
where considered. Murphy v. Clark- 
son, 25 Wash. 585, is contra, but the 
court apparently overlooked the dis- 
tinction between ordinary simple con- 
tracts in writing and negotiable in- 
struments, which was involved in 
Shuey v. Adair, 18 Wash. 188, 63 Am. 
St. Rep. 879, 39 L. R. A. 473. 

53 Holmes, J., in Byington v. Simp- 
son, 134 Mass. 169, 45 Am. Rep. 314, 
[citing Huntington v. Knox, 7 Cush. 
(Mass.) 371; Eastern R. R. v. Bene- 
dict, 5 Gray (Mass.), 561, 66 Am. Dec. 
384; Lerned v. Johns, 9 Allen 
(Mass.), 419; Hunter v. Giddings, 97 
Mass. 41, 93 Am. Dec. 54; Exchange 
Bank v. Rice, 107 Mass. 37, 9 Am. 
Rep. 1; National Ins. Co. v. Allen, 
116 Mass. 398; Higgina v. Senior, 8 
M. & W. 834]. 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1734 



be the parties to it. 54 Under this rule an undisclosed principal could 
not be charged upon such an instrument. 55 The mere fact that the 



54 "Where a contract is made by 
deed, under seal, on technical grounds,, 
no one but a party to the deed is 
liable to be sued upon it, and, there- 
fore, if made by an attorney or agent, 
it must be made in the name of the 
principal, in order that he may be 
a party, because otherwise he is not 
bound by it." Shaw, C. J., in Hunt- 
ington v. Knox, 1 Gush. "(Mass.) 374. 

ss Huntington v. Knox, supra; 
Haley v. Belting Co., 140 Mass. 73; 
Mahoney v. McLean, 26 Minn. 415; 
Briggs v. Partridge, 64 N. Y. 357, 21 
Am. Rep. 617; Kiersted v. Orange, 
etc., R. Co., 69 N. Y. 343, 25 Am. Rep. 
199; Schaefer v. Henkel, 75 N. Y. 378; 
Henricus v. Englert, 137 N. Y. 488; 
Farrar v. Lee, 10 N. Y. App. Div. 
130; Whitehouse v. Drisler, 37 N. Y. 
App. Div. 525; Williams v. Magee, 76 
N. Y. App. Div. 512: Spencer v. Hunt- 
ington, 100 N. Y. App. Div. 463 (aff'd 
without opinion, 183 N. Y. 506) ; Fur- 
culi v. Bittner, 69 N. Y. Misc. 112; 
Denike v. DeGraaf, 87 Hun (N. Y.), 
61 (aff'd no opinion), 152 N. Y. 
650; Benham v. Emery, 46 Hun 
(N. Y.), 156; Smith v. Pierce, 45 App. 
Div. (N. Y.) 628; Stanton v. Grang- 
er, 125 N. Y. App. Div. 174; Willard 
v. Wood, 135 U. S. 309, 313, 34 L. 
Ed. 210; Badger Silver Min. Co. v. 
Drake, 31 C. C. A. 378, 88 Fed. 48; 
City of Providence v. Miller, 11 R. I. 
272; Lenney v. Finley, 118 Ga. 718; 
Van Dyke v. Van Dyke, 123 Ga. 686, 
3 Ann. Cas. 978. 

Briggs v. Partridge, 64 N. Y. 357, 
21 Am. Rep. 617, is a leading case. 
In this case it appeared that an agent 
appointed by parol. had, without dis- 
closing his agency, made in his own 
name a contract under seal for the 
purchase of real estate, but it was 
held that the contract was not en- 



forceable against the principal either 
as a contract under seal or as a sim- 
ple contract. See also, Klein v. Me- 
chanics Bank, 145 App. Div. 615; Tut- 
hill v. Wilson, 90 N. Y. 423. 

Neither does the rule apply to a 
lease under seal. Nor can liability 
be enforced in equity. The relation 
between the owner of land and those 
who occupy it is of a purely legal 
character (Borcherling v. Katz, 37 
N. J. Eq. 150); and this is true al- 
though the fact of the agency is re- 
cited and it extrinsically appears 
that the lessee acted as agent and al- 
though the principal occupies the 
premises without assignment of the 
lease and furnishes money to pay the 
rent. Kiersted v. Orange, etc., R. R. 
Co., 69 N. Y. 343, 25 Am. Rep. 199. 
See also, Haley v. Belting Co., 140 
Mass. 73; Schaefer v. Henkel, 75 N. 
Y. 378; Rand v. Moulton, 72 App. Div, 
236; Lenney v. Finley, 118 Ga. 718. 

A contract for the sale of land 
made by the agent under seal in his 
own name and not disclosing any 
principal cannot be specifically en- 
forced against the principal, even 
though it be alleged that he ratified 
it. Stanton v. Granger, 125 N. Y. 
App. Div. 174, aff'd, 193 N. Y. 656. No 
action for damages against the prin- 
cipal will lie in such a case. Ma- 
honey v. McLean, 26 Minn. 415. 

But in Schenkberg v. Treadwell, 94 
N. Y. Supp. 418, it is held that where 
persons, assuming to act as officers of 
a non-existing corporation, sign a 
lease in its assumed name but adding 
their pretended official titles, they are 
personally liable, although the lease 
was under seal. One judge dissented. 
There was no discussion by the ma- 
jority, merely a citation of cases to 
a per curiam affirmance. 



.Y .W >' 



1317 



1735] rffE LAW OF AGENCY [BOOK iv 

principal received the benefit of the contract does not, it is held, alter 
this rule. 56 

The common law incidents attached to the presence of a seal were 
confessedly highly technical, and efforts have been made in many 
places to abolish them. In several states statutes have been enacted, 
though not always in the same form or having the same effect. In 
Minnesota, for example, the statute has abolished seals and declared 
that the addition of a seal to an instrument should "not affect its char- 
acter in any respect." Under this statute it has been held that an un- 
disclosed principal may be charged upon an instrument under seal. 57 

On the other hand in Texas where the statute declares that a seal 
shall not be necessary to the validity of any contract, etc., and that the 
addition of a seal shall not "in any way affect the force and effect of 
the same," it was held that the statute had not changed the common law 
rule with respect of the undisclosed principal. 58 

I 735- With reference to authority for the execution of 

instruments, a distinction has been made, as has been seen, between 
instruments to w r hose validity a seal is an essential and those to which 
a seal may happen to be attached but which would be perfectly valid 
and effective without it it being held in the latter case that the un- 
necessary seal might be disregarded as so much surplusage and the in- 
strument dealt with, so far as authority for its execution is concerned, 
as though no seal were attached. 59 

Extending that doctrine still further it has been suggested that it 
may be availed of here, that is to say, that for the purpose of charg- 
ing an undisclosed principal an unnecessary seal may be regarded as 
non-existent; and a number of cases have adopted the suggestion, at 
least so far as to permit the undisclosed principal to sue upon the con- 
tracts. 60 

So far as action upon the contract itself is concerned, however, many 
other cases, chiefly in New York, have refused to apply this theory and 
have held to the general rule.' 1 

BO Klein v. Mechanics Bank, 145 Stowell v. Eldred, 39 Wis. 614; 

N. Y. App. Div. 615. Kirschbon v. Bonzel, 67 Wis. 178; 

BT Streeter v. Janu, 90 Minn. 393; Lancaster v. Knickerbocker Ice Co., 

Efta v. Swanson, 115 Minn. 373. To 153 Pa. 427; Love v. Sierra Nevada, 

same effect: Gibbs v. Dickson, 33 Ark. etc., Co., 32 Cal. 639, 91 Am. Dec. 602. 

107. 6i Briggs v. Partridge, 64 N. Y. 357, 

ss Sanger v. Warren, 91 Tex. 472, 21 Am. Rep. 617; Kiersted v. Orange, 

66 Am. St. Rep. 913. See also, Jones etc., R. Co., 69 N. Y. 343, 25 Am. Rep. 

v. Morris, 61 Ala. 518, 524. 199; Schaefer v Henkel, 75 N. Y. 378: 

5i See ante, 215. Henricus v. Englert, 137 N. Y. 488; 

I 3 l8 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1736 



In a few cases contracts clearly intended to be the contract of the 
principal, but sealed with the seal of the agent, have been held enforce- 
able by and against the principal as simple contracts. 62 

There may also be cases in which, though no action will lie against 
the principal upon the contract itself, there may yet be such elements 
of adoption or receipt of benefits of a contract actually authorized by 
him as to justify a recovery against him upon an implied promise. 03 

1736. Does not apply to negotiable instruments. In addition to 
the limitation upon the principal's liability growing out of the nature 
of the instrument under seal, "there is," as pointed out in a case al- 
ready referred to, 6 * "a well recognized exception to the rule in the case 
of notes and bills of exchange, resting upon the law merchant. Per- 
sons dealing with negotiable instruments are presumed to take them 
on the credit of the parties whose names appear upon them ; and a per- 
son not a party cannot be charged upon proof that the ostensible party 
signed or indorsed as his agent." This doctrine has been applied in 
many cases. 65 

It is entirely possible, however, notwithstanding this rule, that an 
action may, in many instances, be maintained by the original creditor 



Spencer v. Huntington, 100 N. Y. 
App. Div. 463; Denike v. De Graaf, 
87 Hun (N. Y.), 61; Smith v. Pierce, 
45 N. Y. App. Div. 628; Stanton v. 
Granger, 125 N. Y. App. Div. 174, 
aff'd, 193 N. Y. 656, and other New 
York cases cited, supra. 

But in New York it is held that 
the recital of a seal where none is 
affixed does not make the instrument 
a sealed instrument within the gen- 
eral rule. Slade v. Squier, 133 N. 
Y. App. Div. 666. 

82 Randall v. Van Vechten, 19 
Johns. (N. Y.) 60, 10 Am. Dec. 193; 
Dubois v. Delaware & Hud. Canal 
Co., 4 Wend. (N. Y.) 285. 

3 Moore r. Granby Mining Co., 80 
Mo. 86. 

G* Briggs v. Partridge, 64 N. Y. 357, 
21 Am. Rep. 617. 

s Heaton v. Myers, 4 Colo. 59; 
Sparks v. Dispatch Transfer Co., 104 
Mo. 531, 24 Am. St. Rep. 351, 12 L. 
R. A. 714; Webster v. Wray, 19 Neb. 

3 " 



558, 56 Am. Rep. 754; Cortland 
Wagon Co. v. Lynch, 82 Hun (N. Y.), 
173; Ranger v. Thalmann, 84 App. 
Div. 341, affirmed on opinion below, 
178 N. Y. 574; Anderton v. Shoup, 17 
Ohio St. 126; Shuey v. Adair, 18 
Wash. 188, 63 Am. St. R. 879, 39 L. 
R. A. 473; Cragin v. Lovell, 109 U. S. 
194, 27 L. Ed. 903; Ducarrey v. Gill, 
Mood. & Mai. 450. 

Action against the principal has, 
however, been permitted in a number 
of cases upon the ground that though 
the agent's name was signed to the 
note, usually with the word "agent," 
etc., added, that name had been 
adopted as the principal's name and 
therefore the note was originally the 
note of the principal. See Burkhalter 
v. Perry, 127 Ga. 438, 119 Am. St. Rep. 
343; Moore v. McClure, 8 Hun (N. 
Y.), 557; Pentz v. Stanton, 10 Wend. 
(N. Y.) 271, 25 Am. Dec. R58; Kay- 
ton v. Barnett, 116 N. Y. 625. 



: - 



I 737> I 73&] THE LAW OF AGENCY [BOOK iv 

against the principal, not upon the note itself, but upon the considera- 
tion for which it was given. 66 

1737. Exceptions to the general rule. The general rule, how- 
ever, is subject to certain exceptions. Of these the most direct and im- 
mediate are two. One of them grows out of the question whether the 
other party should be permitted to recover of the principal if the latter 
has already paid, credited or settled with the agent. The other, whether 
such a recovery should be allowed if the other party had already takeri 
steps indicating that he intends to charge the agent, even though there 
has been no such payment or settlement. 

For the purpose of discussion, these two exceptions may be tenta- 
tively stated as follows : 

1. Where principal has settled with agent. That the principal is not 
liable where, before the other party has intervened with his claim, the 
principal has settled with, paid or credited the agent in good faith* 
and in reliance upon such a state of conduct or representations on the 
part of the other party, as to reasonably lead the principal to infer 
that the agent had already settled with such other party, or that the 
latter looks exclusively to the agent for payment. 

2. Where other party has elected to hold agent only. That the prin- 
cipal cannot be held liable where the other party, with full knowledge 
as to who was the principal, and with the power of choosing between 
him and the agent, has distinctly and unquestionably elected to treat 
the agent alone as the party liable. 

1738. Of the first exception Change in accounts Misleading 
conduct. This subject has been much discussed in the English 
courts and various and conflicting rules have been laid down in suc- 

es Coaling Co. v. Howard, 130 Ga. The court said that if there had 

807, 21 L. R. A. (N. S.) 1051. been an Instrument under seal given, 

In the Georgia case, land had been instead of the notes, the action could 

sold and conveyed to one W, who was not have been maintained, as in that 

described as "trustee" and who was case the simple contract would have 

really the undisclosed agent or trus- been merged in the higher. See Van 

tee of the defendants in making the Dyke v. Van Dyke, 123 Ga. 686, 3 

purchase. For a portion of the pur- Ann. Cas. 978. But that the note was 

chase price, W gave notes signed by a simple contract and that one sim- 

himself with the word "trustee" pie contract did not merge another, 

added. Held, that an action could be Theoretically and historically there 

maintained for the recovery of the seems to be as much reason to say 

balance of the purchase price against this in the case of the negotiable in- 

the defendants as undisclosed princi- strument. 
pals, not upon the notes 'but upon 
"the original consideration." 

1320 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1739, I74-C 

cessive cases. Some of these rules have been adopted by the courts 
and textwriters in this country, but have been afterwards denied or 
limited by later cases in the English courts, and the result has been an 
exceedingly unsatisfactory condition of the law. 

The question, as will be seen, is substantially whether the rule shall 
go beyond the point marked by the * in its statement above. 

I 739- Thomson v. Davenport. One of the earliest of 

these cases is that of Thomson v. Davenport, 67 decided in the court of 
King's Bench, in 1829. In that case the agent disclosed that he was 
acting for a principal in Scotland but did not disclose his principal's 
name. Lord Tenterden, in his opinion, said : "I take it to be a general 
rule, that if a person sells goods (supposing at the time of the contract 
he is dealing with a principal), but afterwards discovers that the per- 
son with whom he has been dealing is not the principal in the transac- 
tion, but agent for a third person, though he may in the meantime have 
debited the agent with it, he may afterwards recover the amount from 
the real principal ; subject, however, to this qualification, that the state 
of the account between the principal and the agent is not altered to the 
prejudice of the principal," and Bayley, J., in the same case, said: 
"Where a purchase is made by an agent, the agent does not, of neces- 
sity, so contract as to make himself personally liable ; but he may do so. 
If he does make himself personally liable, it does not follow that the 
principal may not be liable also, subject to this qualification, that the 
principal shall not be prejudiced by being made personally liable if the 
justice of the case is that he should not be personally liable. If the 
principal has paid the agent, or if the state of accounts between the 
agent and the principal would make it unjust that the seller should call 
on the principal, the fact of payment or such a state of accounts would 
be an answer to the action brought by the seller where he had looked 
to the responsibility of the agent." 

The rule as laid down by Lord Tenterden was approved by Mr. Par- 
sons in his work on Contracts, 68 and by Judge Story in his work on 
Agency. 69 It was also adopted in Indiana. 70 

1740. Heald v. Kenworthy. Following this case came 

Heald v. Kenworthy, 71 decided in the Exchequer in 1855. The case 
arose upon the sufficiency of a plea to a declaration for goods sold and 
delivered. The plea alleged that the goods were bought for defendant 

T 9 Barn. & Cress. 78. TO Thomas v. Atkinson, 38 Ind. 248. 

8 Parsons on Contracts, 63. " 10 Exch. 739. 

9 Story on Agency, 449,. 

1321 



I74 1 ] THE LAW OF AGENCY [BOOK IV 

by his agent; that the latter bought in his own name and not -in that 
of defendant; that plaintiff gave credit to the agent not knowing of 
defendant, and that while plaintiff still gave credit to the agent, de- 
fendant, in good faith, "at reasonable and proper times and according 
to the usual course of dealing" between himself and his agent, settled 
with the agent, believing and having reason to believe that the latter 
would settle with the plaintiff. 

The plea was held not to be good : the expressions of Lord Tenter- 
den and Bayley, J., were shown to be mere dicta, and were held to be 
inaccurate statements of the law. Parke, B., who delivered the leading 
opinion, limited the rule to those cases in which the principal has been 
misled by the action of the seller, saying: "If the conduct of the seller 
would make it unjust for him to call upon the buyer for the money, as 
for example, where the principal is induced by the conduct of the seller 
to pay his agent the money on the faith that the agent and seller have 
come to a settlement on the matter, or if any representation to that ef- 
fect is made by the seller, either by words or conduct, the seller cannot 
afterwards throw off the mask and sue the principal." 

1741. Armstrong v. Stokes. Afterwards arose the case 

of Armstrong v. Stokes, 72 decided in the court of Queen's Bench in 
1872. In this case J. & O. Ryder, who were commission merchants 
at Manchester, acting sometimes for themselves and sometimes as 
agents, having received an order for goods from defendants, bought 
them of plaintiff, without disclosing that they were not acting for 
themselves. 

J. & O. Ryder delivered the goods to defendants who paid for them 
in good faith. Afterward J. & O. Ryder failed, not having paid the 
plaintiff. Later it was discovered by plaintiff that J. & O. Ryder had 
bought the goods for the defendants and thereupon the plaintiff brought 
the action to charge defendants as undisclosed principals, but it was 
held that defendants' payment to J. & O. Ryder was a bar to recovery. 
Blackburn, J., who delivered the opinion of the court (Blackburn, Mel- 
lor and Lush), held that the rule laid down by Parke, B., was too nar- 
row and cited and approved that advanced by Lord Tenterden and 
Mr. Justice Bayley. 

Referring to the rule of Parke, B., the court say : "We think that if 
the rigid rule thus laid down were to be applied to those who were 
only discovered to be principals after they had fairly paid the price 
to those whom the vendor believed to be the principals, and to whom 

w 
2 L. R. 7 Q. B. 598. 

1322 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/42 

alone the vendor gave credit, it would produce intolerable hardship. 
It may be said, perhaps truly, this is the consequence of that which 
might originally have been a mistake, in allowing the vendor to have 
recourse at all against one to whom he never gave credit, and that w,e 
ought not to establish an illogical exception in order to cure a fault in 
a rule. But we find an exception (more or less extensively expressed) 
always mentioned in the very cases that lay down the rule ; and with- 
out deciding anything as to the case of a broker, who avowedly acts 
for a principal (though not necessarily named), and confining our- 
selves to the present case, which is one in which, to borrow Lord Ten- 
terden's phrase in Thomson v. Davenport, 73 the plaintiff sold the goods 
to J. & O. Ryder (the agents), 'supposing at the time of the contract 
he was dealing with a principal,' we think such an exception is estab- 
lished. We wish to be understood as expressing no opinion as to what 
would have been the effect of the state of the accounts between the 
parties if J. & O. Ryder had been indebted to the defendants on a 
separate account, so as to give rise to a set-off or mutual credit between 
them. We confine our decision to the case where the defendants, after 
the contract was made, and in consequence of it, bona fide and with- 
out moral blame, paid J. & O. Ryder at a time when the plaintiff still 
gave credit to J. & O. Ryder and knew of no one else. We think that 
after that it was too late for the plaintiff to come upon the defendant." 

1742. Irvine v. Watson In the Queen's Bench. This 

case, in its turn, was followed by Irvine v. Watson, 7 * decided in the 
Queen's Bench in 1879 H1 which Bowen, J., laid down the following- 
rules : "There are two classes of sales through an agent to an undis- 
closed principal which it is necessary to distinguish. I. Where the 
seller supposes himself to be dealing with a principal, but discovers 
afterwards that he has been selling to an agent, and that there is an 
undisclosed principal behind, the law allows the seller to have recourse 
on such discovery to the undisclosed principal, provided always 75 that 
the principal has not meanwhile paid the agent, or that the state of ac- 
counts between the principal and agent does not render it unjust, i. e., 
inequitable that the seller should any longer look to the principal for 
payment. This statement of the proviso which relieves the undisclosed 
principal in certain cases from all necessity to pay the seller was thought 
by Parke, B., and the other judges in Heald v. Kenworthy 7e to be too 

73 Supra. and Bayley, J., In Thomson v. Daven- 

7* 5 Q. B. Div. 102. port, 9 B. & C. 78. ^ BT 

T5 See, per Lord Tenterden, C. J., 78 10 Exch. 745. 



THE LAW OF AGENCY [BOOK IV 

large without further explanation, and they expressed the view that the 
only case in which the seller under such circumstances was precluded 
from having recourse to the undisclosed principal when discovered, 
was when the seller, by some conduct of his own, had misled the prin- 
cipal into paying or settling with his agent in the interim. The prin- 
cipal, such is the reasoning of the court of Exchequer, has originally 
authorized his agent to create a debt, and the principal cannot be dis- 
charged from the debt unless the seller has estopped himself, by his 
conduct, from enforcing it against him. The court of Queen's Bench 
in Armstrong v. Stokes, 77 do not adopt this narrower version of Lord 
Tenterden's and Mr. Justice Bayley's proviso. They revert to the 
wider language used by Lord Tenterden and Bayley, J., in Thomson 
v. Davenport, 78 and it must now be taken to be the law that a seller 
who has given credit to an agent, believing him to be a principal, can- 
not have recourse against the undisclosed principal, if the principal 
has bona fide paid the agent at a time when the seller still gave credit 
to the agent, and knew of no one else except him as principal. 

"2. The present case is one that belongs to a distinct but analogous 
class. At the time of the dealing in the goods, the seller was informed 
that the person who came to buy was buying for a principal, but was 
not told, and did not ask, who that principal was, nor anything further 
about him. Thomson v. Davenport 79 is the leading authority to show 
that, in such a case, where no payment or settlement in account be- 
tween the undisclosed principal and his agent has intervened, the seller 
may afterwards have recourse to the undisclosed principal. But what 
if the undisclosed prin:ipal has meanwhile innocently paid or settled 
with his agent? If ineeed such payment or settlement is the result of 
any misleading conduct on the part of the seller, then, no doubt, the 
general principal alluded to in Heald v. Ken worthy, 80 would equally 
apply, and the seller could no longer pursue his remedy against the 
man whom he had misled. But is this the only proviso, or must a 
wider proviso still in the present class of cases be engrafted on the 
statement of the rule, similar to the proviso as finally sanctioned in 
Armstrong v. Stokes. 81 This was a case in which, at the time of sale, 
exclusive credit had been given by the seller to the agent, who bought 
in his own name as principal. In the present instance the agent bought, 
it is true, in his own name, but held out to the seller the additional 

it Supra. so supra. 

73 supra. si Supra. 

19 Supra. 

1324 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1742 

advantage of the credit of an unnamed principal behind. What dif- 
ference to the liability of the principal does this make? It is obvious 
that when, as in Armstrong v. Stokes, 82 the seller deals exclusively 
with the agent as principal, the seller sells knowing, if his buyer turns 
out to have a principal behind him, the principal will have, at all events, 
been justified in assuming, as the fact is, that the seller deals simply 
with the agent. The principal may be expected to arrange with his 
agent on this basis. If before recourse is had to him, the undisclosed 
principal has put his agent in funds to pay, the seller cannot afterward 
object that the undisclosed principal, who had a right to suppose his 
credit was not looked to in the matter, should have held his hand. The 
case is altered where the agent, when buying, states he has a principal 
whose existence, though he does not name him, he is authorized in 
mentioning. I think that the liability of the principal, who under such 
circumstances pays his agent, to pay over again to the seller must de- 
pend in each case on what passes between the seller and the agent, 
acting within the scope of his authority, and on the precise nature of 
the contract which the agent has lawfully made. * * * The es- 
sence of such a transaction is that the seller, as an ultimate resource, 
looks to the credit of some one to pay him if the agent does not. Till 
the agent fails in payment, the seller does not want to have recourse to 
this additional credit. It remains in the background : but if, before the 
time comes for payment, or before, on non-payment by the agent, re- 
course can be fairly had to the principal whose credit still remains 
pledged, the principal can pay or settle his account with his own agent, 
he will be depriving the seller behind the seller's back of his credit. It 
surely must, at all events, be the law that in the case of sales of goods 
to a broker the principal, known or unknown, cannot, by paying or 
settling before the time of payment comes, with his own agent, relieve 
himself from responsibility to the seller, except in the one case, where 
exclusive credit was given by the seller to the agent. But may the 
payment or settlement to or with the agent be safely made in such a 
case after the day of payment has arrived, and if so within what time ? 
It seems to me that it can only safely be made if a delay has intervened 
which may reasonably lead the principal to infer that the seller no 
longer requires to look to the principal's credit, such a delay, for ex- 
ample, as leads to the inference that the debt is paid by the agent, or to 
the inference that, though the debt is not paid, the seller elects to aban- 
don his recourse to the principal and to look to the agent alone." 

sz Supra. 
1325 



I743 J 744] THE LAW OF AGENCY [BOOK IV 

1743. Irvine v. Watson in the court of appeal Irvine v. 

Watson, however, went to the court of appeal 83 where, while the re- 
sult reached below was affirmed, the court declare the rule as laid down 
by Parke, B., in Heald v. Kenworthy, to be the true one. 

The court did not expressly overrule Armstrong v. Stokes [Bram- 
well, L. J., spoke of it as "a very remarkable case ;" and Brett, L. J., 
declared it depended upon "the peculiar customs obtaining in Man- 
chester in relation to the business of commission merchants"] as the 
difference in the facts enabled them to draw a distinction between the 
cases, but Bramwell, L. J., said : "It is to my mind certainly difficult to 
understand that distinction, or to see how the mere fact of the vendor's 
knowing or not knowing that the agent has a principal behind him can 
affect the liability of that principal. I should certainly have thought 
that his liability would depend upon what he himself knew, that is to 
say, whether he knew that the vendor had a claim against him and 
would look to him for payment in the agent's default," and Brett, L. J., 
said : "If the case of Armstrong v. Stokes arises again, we reserve to 
ourselves sitting here, the right of reconsidering it." The distinction 
of Parke, B., was again approved in Davison v. Donaldson, 84 decided 
in the court of appeal in 1882. 

The result, therefore, of the English cases seems to be to limit the 
exception to that first stated by Parke, B., 83 although that may perhaps 
not be settled beyond controversy. 86 

1744. What is misleading conduct. The question of 

what acts or conduct of the other party may be sufficient to reasonably 
lead the principal to believe that the agent only is relied upon, has not 

83 5 Q. B. Div. 414; 49 L.. J. C, L. Browne had failed to distinguish be- 

531, 42 L. T. 800. The opinions dif- tween the author's own statement and 

fer more or less as reported in these his quotation from an English judge, 

various reports. The quotations in Upon having his attention called to 

the text are made from the official thfs fact, Mr. Browne promptly ac- 

edition. knowledged his error, and promised 

a* L. R. 9 Q. B. Div. 623. In Can- to correct it in future reprints, and 

ada, see Arbuthnot v. Dupas, 15 Mani- this has now been done, 

toba, 634. In Scotland, see Lament v. ssThus Mr. Bowsteart in his Di- 

Hamilton, [1907] S. C. 628. gest of the Law of Agency (3d ed. 

SB The learned American editor of 1907), p. 303, says that Armstrong v, 
"English Ruling Cases, Vol. 2, p. 483, Rtokfs "must be treated as still be- 
first impression, in referring to this insr law, because it has not been 
statement erroneously suggested that dffinitely overruled. It is, however, 
the present author had been incon- of very doubttvi authority, and cer- 
sistent in stating the result of the tainly will not be in the least ex- 
English cases. The fact was that Mr. tended." 

1326 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1744 

been much considered, and it is not one which readily lends itself to 
definite rules. It must be largely a question of fact in each particular 
case. In Irvine v. Watson 8T the defendants had given their broker 
an order to buy goods, and the broker had bought them in his own name 
of the plaintiffs, stating that he had a principal but not disclosing his 
identity. The invoice given by plaintiffs to the broker stated that the 
terms were, "cash (or before delivery if required) allowing two and 
one-half per cent discount." The broker rendered to defendants a 
statement of the purchase stating terms of payment, "cash, less two 
and one-half per cent." The sellers, however, did not insist upon cash 
on or before delivery. They made no demand on the broker for pay- 
ment for five or six days. Then they demanded payment from him at 
intervals for about ten days, after which, the broker having stopped 
payment, they made demand for the first time upon defendants. In 
the meantime defendants had paid the broker. Under these circum- 
stances defendants urged that they had a right to believe from the fact 
that the terms were "cash" that plaintiffs would not have delivered the 
goods unless they had gotten their pay and that therefore defendants 
were justified in paying the broker within the rule of Heald v. Ken- 
worthy. It appeared, however, that even where the terms of sale were 
"cash," there was no fixed custom of insisting upon payment at the 
precise time of delivery and that it was not infrequent to allow a few 
days of grace after delivery. It also appeared that defendants had paid 
the broker (by accepting his draft which he immediately discounted) 
before part of the goods had in fact been delivered. It was held that 
these facts furnished no sufficient evidence that defendants had been 
misled by the plaintiffs. Bramwell, L. J., said : "The terms of the con- 
tract were 'cash on or before delivery' and it is said that the defendants 
had a right to suppose that the sellers would not deliver unless they 

87 Irvine v. Watson, 5 Q. B. Div. Argument in Heald v. Kenworthy, 10 

414, 49 L. J. 531, 42 L. T. 800. In Exch. 739. 

Kymer v. Suwercropp, 1 Camp. 109, In Horsfall v. Faimtleroy, 10 B. & 

it was said that permitting the time C. 755 a statement in a sales cata- 

of payment to pass without a demand logue that the terms of credit on 

upon the principal, was a mislead- which the agent bought were billed at 

ing circumstance; but no such point two months was held sufficient to 

was actually involved in the case, lead the principal to believe that the 

See Smyth v. Anderson, 7 C. B. 21. agent must hgve given his bill for 

Compare Macfarlane v. Giannaeopulo, the goods and to protect him in therc- 

8 H. & N. 860. See this point in upon accepting the agent's draft 
Armstrong v. Stokes, supra; also the 

1327 



1745] THE LAW OF AGENCY [BOOK iv 

received payment of the price at the time of delivery. I do not think, 
however, that this is a correct view of the case. The plaintiffs had a 
perfect right to part with the oil to the broker without insisting strictly 
upon their right to prepayment and there is, in my opinion, nothing in 
the facts to justify the defendants in believing that they would so in- 
sist. No doubt if there was an invariable custom in {he trade to in- 
sist on prepayment where the terms of the contract entitled the seller to 
it, that might alter the matter; and (in such case non-insistence on pre- 
payment might discharge the buyer if he paid the broker on the faith 
of the seller already having been paid. But that is not the case here ; 
the evidence shows that there is no invariable custom to that effect." 

1745. Delay, etc. In Davison v. Donaldson 88 one of 

several owners of a boat bought supplies for her of the plaintiff. The 
latter knew that there were other owners though it does not appear that 
he knew who they were. The goods were charged to the one who 
bought them. He collected the amount from the other co-owners but 
did not pay the plaintiff. The plaintiff finally sued the other owners. 
Their defence was that they had settled with the managing owner be- 
lieving that he had paid the plaintiff, and that they had been misled by 
the fact that the plaintiff had not pressed his claim against the pur- 
chaser who had now become insolvent. It did not appear, however, that 
there had been any unreasonable delay at the time they settled with 
the managing owner, and the real gist of the defendants' contention 
was that if they had known of plaintiff's claim against them they could 
have recovered the money from the managing owner before he became 
insolvent. This was held not sufficient to release defendants. Jessel, 
M. R., said : "The principal cannot be heard to say that the subsequent 
conduct of the plaintiff induced him not to sue the agent for repayment 
of the money. Independently of the settlement of accounts there is no 
evidence that the mere abstaining from pressing the agent is an injury 
to the principal. A debtor must find out his creditor and go and pay 

ss Davison v. Donaldson, 9 Q. B. There are dicta In a number of 

Dlv. 623, 47 L. T. 564. See also, The cases that the right to charge the un- 

Huntsman, [1894] Pro. Div. 214. disclosed principal must be exercised 

In Berry v. Chase, 102 C. C. A. 572, within a reasonable time. See Smeth- 

179 Fed. 426, it was held that a de- hurst v. Mitchell, 1 El. & El. 622; Fell 

lay of three or four months in mak- v. Parkin, 52 L. J. Q. B. 99, 47 L. T. 

ing claim upon the principal after Rep. 350; Curtis v. Williamson, L. R. 

discovery was- not so unreasonable 10 Q. B. 57; Irvine v. Watson, 5 Q. 

as to discharge him In the absence B. Div. 102. 
of anything to prejudice him there- 
by. 

1328 



CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1746-1748 

him." "No doubt in many cases principals may reasonably rely on 
the honor of their agents, and may not require vouchers ; but when they 
come into a court of law and seek to excuse themselves from liability, 
and it turns out that they have not required the production of vouchers, 
they must expect the court to deal strictly with them." Bowen, L. J., 
said : "I do not say that in very special circumstances mere delay may 
not amount to misrepresentation: it may be conduct misleading the 
defendant. But that can only be when there is something in the origi- 
nal contract or in the conduct of the parties which renders the delay 
misleading. The creditor is not obliged to apply to all his debtors if he 
can get payment from one of them." This case, however, as was 
pointed out by the judges, was not the mere case of principal and agent 
because the defendants were co-owners or partners with the managing 
owner and jointly liable with him. 

1746. Giving the agent a receipt for the price, even 

though mistakenly, upon the strength of which the principal in good 
faith pays or credits the agent, will be such conduct as protects the 
principal. 89 

1747. It must be kept in mind that this exception dif- 
fers from the following one. This is not a question of election but of 
misleading. It is essential here that the principal shall have done 
something shall have paid or credited or otherwise altered his situa- 
tion which will prejudice him if he now be called upon to pay. No 
such act is necessary where election alone is involved. 

It is also possible that that which would not suffice to constitute an 
election may be sufficient to relieve the principal under this rule if he 
has reasonably acted upon it to his prejudice. For example, the com- 
mencement of suit against the agent is, as will be seen, not usually re- 
garded as sufficient to constitute an election. But would the principal 
be liable again if, after the other party who knows there is a principal 
and has had an opportunity to sue him has sued the agent, the princi- 
pal in reliance thereon should pay the agent ? It would seem that there 
might be cases in which the conduct of the plaintiff was so unambiguous 
and decisive as to be reasonably relied upon by the principal. 

1748. The rule in the United States. The subject has 

not very frequently arisen in the United States and has not been thor- 
oughly considered in any very recent case by a court of last resort. 

so Cheever v. Smith, 15 Johns. (N. Co., 30 Md. 39; Hyde v. Wolf, 4 La. 
Y.) 276; English p v. Rauchfuss, 21 234, 23 Am. Dec. 484. 
N. Y. Misc. 494; Brown v. Telegraph 

84 1329 



1749] 



THE LAW OF AGENCY 



[BOOK iv 



In the earlier cases, as was naturally to be expected, the tendency was 
to follow the rule laid down by Judge Story and Professor Parsons, 
based upon the dictum of Lord Tenterden, 90 (that is, as far as the * 
in 1737 ante.) A general statement of the rule was made some years 
ago by the New York court of appeals 91 with the exception "provided 
he has not in the meantime in good faith paid the agent," but the state- 
ment was a mere dictum. Most of the cases which have arisen since 
Irvine v. Watson was decided by the court of appeal, have either ig- 
nored that decision or apparently failed to note its full significance. 92 
1749. General conclusions. Notwithstanding the re- 
marks of Bramwell, L. J., the distinction between the case where the 
other party knows that there is a principal in existence though he does 
not know who he is and that where he is totally ignorant of the exist- 
ence of such a person, seems not without significance. Certainly if the 
other party is to be charged with the consequences of his misleading 



o Thus for example in 1847 in Clea- 
land v. Walker, 11 Ala. 1058, 46 Am. 
Dec. 238; in 1855, in Fish v. Wood, 4 
E. D. Smith (N. Y. Com. Pleas), 327; 
in 1871, in Thomas v. Atkinson, 38 
Ind. 248; in 1879, in McCullough v. 
Thompson, 45 N. Y. Super. 449. See 
also, Ketchum v. Verdell, 42 Ga. 534; 
Emerson v. Patch, 123 Mass. 541. 
The Georgia code enacts substantially 
the rule of Thomson v. Davenport. 
On the contrary, in 1866, in York 
County Bank v. Stein, 24 Md. 447, 
the rule of Baron Parke in Heald v. 
Kenworthy, was approved in reliance 
upon the staterrient of the Editor of 
Story on Agency. 

91 Knapp v. Simon (1884), 96 N. 
Y. 284. 

92 The question was quite fully con- 
sidered in 1885 in Laing v. Butler, 37 
Hun (N. Y.), 144. The court cites 
Armstrong v. Stokes and Irvine v. 
Watson as applying to different 
classes of cases and apparently with- 
out attaching much importance to 
the comments made upon the former 
case by the Court of Appeal when 
Irvine v. Watson was before it. 

There is also a very interesting 
discussion in Fradley v. Hyland 



(1888), 37 Fed. 49, 2 L. R. A. 749; 
Irvine v. Watson, in the Queen's 
Bench Division, is cited, but not the 
case in the Court of Appeal. See al- 
so, Harder v. Continental Printing 
Co., 64 N. Y. Misc. 89. 

A very general reference to the 
matter is made in Berry v. Chase, 77 
C. C. A. 161, 146 Fed. 625, 102 C. C. 
A. 572, 179 Fed. 426. 

The question was involved in Nich- 
olson v. Pease, 61 Vt. 534, and the 
syllabus indicates the case as holding 
that "a traveling salesman who is 
furnished with money by his employ- 
er to pay his expenses while on the 
road, cannot bind his principal for 
the payment of such expenses if, be- 
fore receiving notice from the party 
extending such credit, the employer 
has settled with his salesman and al- 
lowed him the amount of such ex- 
penses." There is, however, no dis- 
cussion of the point in the opinion. 
There is a statement of the English 
rule as a dictum in Simmons Hard- 
ware Co. v. Todd, 79 Miss. 163; and 
Guest v. Burlington Opera House Co., 
74 Iowa, 457. See the cases reviewed 
in 1889 by Mr. John W. Beaumont in 
23 American Law Review, 565. 



1330 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I/5O 

conduct, it seems much more reasonable and just to do so where he 
knows that there is a principal whose actions may be affected by his 
conduct than where he has no such knowledge. It may be suggested 
that every person who dc?.k without expressly excluding that possibil- 
ity may always be regarded as potentially an agent with an undisclosed 
principal ; but the suggestion seems forced if not fanciful. 

Nevertheless, the rule of Parke, B., seems on the whole to be rea- 
sonable and just. If a principal sends an agent to buy goods for him 
and on his account, it is not unreasonable that he should see that they 
are paid for. Although the seller may consider the agent to be the 
principal, the actual principal knows better. He can easily protect him- 
self by insisting upon evidence that the goods have been paid for or 
that the seller with full knowledge of the facts has elected to rely upon 
the responsibility of the agent, and if he does not, but, except where 
misled by some action of the seller, voluntarily pays the agent without 
knowing that he has paid the seller, there is no hardship in requiring 
him to pay again. If the other party has the right, within a reasonable 
time, to charge the undisclosed principal upon his discovery, and this 
right seems to be abundantly settled in the law of agency it is diffi- 
cult to see how this right of the other party can be defeated, while he 
is not himself in fault, by dealings between the principal and the agent, 
of which he had no knowledge, and to which he was not a party. 

1750. Of the second exception "Election." The second excep- 
tion to the general rule is commonly said to rest upon the theory of 
"election." A wholly anomalous situation is presented. A contract 
has been made which in terms binds the agent only. Nevertheless the 
principal may be made liable upon it. How is he liable ? Although the 
other party may perhaps sue both severally but simultaneously, or pos- 
sibly sue both jointly, 93 the obligation can hardly be deemed a joint 
one in the sense that it can ultimately be enforced against both. 9 - 1 
Neither can it be said that both are liable severally in the sense that 
recovery can be had partly from each. The liability is commonly said 
to be an alternative one. The agent can be held because he made the 
contract in his own name, or the principal can be held because it is in 
law deemed to be his contract. Which one shall be held ? The answer 
ordinarily given is that the other party may "elect" between them. As 

3 See cases post, 1758, note 14. 742; Belt v. Washington Power Co., 

4 See Tew v. Wolfsohn, 77 N. Y. 24 Wash. 387; Steele-Smith Grocery 

App. Div. 454; McLean v. Sexton, 44 Co. v. Potthast, 109 Iowa, 413; Good- 

N. Y. App. Div. 520; Gay v. Kelley, ale v. Page, 92 S. Car. 413. 
109 Minn. 101, 26 L, R. A. (N. S.) 

1331 



I75 1 ] THE LAW OF AGENCY [BOOK IV 

a corollary to this, it is said that the other party has but one choice ; 
that when he has made his election his determination is final ; and he 
cannot afterwards make a new choice even though his first efforts did 
not result in a satisfaction of his claim. How far this is true, it is now 
necessary to inquire. Before doing so, it may be well to notice one pre- 
liminary matter. 

Election properly is a matter of choice. It does not rest upon estop- 
pel. It is not therefore essential in order to make it conclusive that it 
shall appear to have misled the principal to his prejudice. If, however, 
it has misled him if the principal, being apprised of the fact that the 
other party has elected to look to the agent, settles with the agent upon 
that basis and either pays him or allows him a corresponding credit, 
nothing could be more unjust than to permit the other party after- 
wards to repudiate his action with the agent and resort to the princi- 
pal. 95 

1751. Theories of election. With reference to this mat- 
ter of election four views are possible: I. That the other party un- 
expectedly finds himself in a situation where he can hold one of two 
parties liable and he must simply choose between them. 2. That the 
other party, inasmuch as he has a contract in terms with the agent, will 
presumptively pursue this obligation, and that therefore some affirma- 
tive action is necessary to show that he intends to abandon this for 
his remedy against the principal. 3. That the other party, as soon as 
he discovers the existence of the principal, will presumptively look to 
him rather than to the agent, and that some affirmative act is therefore 
necessary to show that he prefers to hold the agent. 4. That the other 
party, having actually dealt with the agent as principal and obtained 
an obligation against him, but finding unexpectedly that he also has a 
claim against the principal, intends to make the most of the situation 

Bpaterson v. Gandasequi, 15 East, Smith, 15 Johns. (N. Y.) 276; Bush 

62; Addison v. Gandasequi, 4 Taunt, v. Devine, 5 Har. (Del.) 375; Brown 

574; Thomson v. Davenport, 9 Barn. v. Bankers, etc., Tel. Co., 30 Md. 39; 

& Cress. 78; Horsfall v. Fauntleroy, Schepflin v. Dessar, 20 Mo. App. 569; 

10 Barn. & Cress. 755; Smyth v. An- Hyde v. Wolfe, 4 La. 234, 23 Am. Dec. 

derson, 7 Com. Bench, 21; Irvine v. 484; Romans v. Lambard, 21 Me. 308. 
Watson, 5 Q. B. Div. 102; Armstrong One who gives a receipt to a state 

V. Stokes, L. R., 7 Q. B. 599; Heald agent, without actual payment cannot 

v. Kenworthy, 10 Exch. 739; Kymer afterward hold the state although he 

v. Suwercropp, 1 Camp. 109: Mac- has given notice to the accounting of- 

farlane v. Giannacopulo, 3 Hurl. & fleers not to allow such receipt as a 

Nor. 859; Clealand v. Walker, 11 Ala. credit to the agent. Pitler v. Com- 

1058, 46 Am. Dec. 238; Cheever v. monwealth, 31 Pa. 406. 

1332 



CHAP. V 7 ] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1752, 1753 

to keep and enforce his claims against both until he has obtained sat- 
isfaction from one of them or has done something which in fact or in 
law shows that he has abandoned his claim against one or the other of 
them. 

Any one of these views might undoubtedly be taken, but no one of 
them, in fact, has been consistently held. The field is therefore open 
for the adoption of the one which seems most consistent with principle 
and the peculiarities of the situation. That the last is the sound and 
natural view would seem to require no argument to establish, although 
it undoubtedly is not election in the ordinary sense. From the stand- 
point of the liability of the principal it would lead to this conclusion : 
that no act with reference to keeping alive or enforcing the liability of 
the agent would discharge the principal unless it also showed that the 
other party did not intend to charge the principal. 

1752. Knowledge necessary. Election, as has been 

pointed out involves choice, and choice presupposes knowledge of the 
alternatives and freedom to choose between them. The other party 
cannot elect between the principal and the agent so long as he does not 
know that there was a principal in the transaction, or does not know 
who he was ; and this knowledge must include not only the fact of the 
agency but the name and identity of the principal. 96 What he may do 
before that can not be charged to him as an election. 

I 753- At this stage it seems desirable to notice more 

fully a question already referred to, namely, whether the rules are the 
same whether the other party knows there is a principal but does not 
know who he is, or is totally ignorant of the existence of any principal, 
and believes that the agent is the only person interested. In general, as 
has been pointed out, that distinction is deemed immaterial. It was fully 
discussed in Thomson v. Davenport, 97 where Bayley, J., said "There 
is no authority to show that mere knowledge that there is a principal 
destroys the right of the seller to look to that principal as soon as he 
knows who that principal is, provided he did not know who he was at 
the time when the purchase was originally made." It is true that Lord 
Blackburn, in Armstrong v. Stokes, 98 refers to such a distinction, cit- 
ing the case of the broker who is usually known to be acting for a prin- 
cipal, though the latter's identity may not be disclosed. But in Irvine 

as Greenburg v. Palmieri, 71 N. J. Kenyon, 48 Conn. 314, 40 Am. Rep. 

L. 83; Steele-Smith Grocery Co. v. 174; Reid v. Miller, 205 Mass. 80. 

Potthast, 109 Iowa, 413; Curtis v. Wil- ^ 9 B. & C. 78. 

liamson, L. R., 10 Q. B. 57; Merrill v. L, R. 7 Q. B. 598. 

1333 



1754] THE LAW OF AGENCY [BOOK iv 

v. Watson, 09 as has been seen, 1 Lord Bramwell, referring to that case, 
said, "It is to my mind certainly difficult to understand that distinction, 
or to see how the mere fact of the vendor knowing or not knowing that 
the agent has a principal behind can affect the liability of that princi- 
pal." Several American cases 2 have approved the views of Bayley, J., 
saying that even if the other party knew there was a principal, but did 
not know who he was, he could not then choose between them or debit 
the real principal. 

It seems to be everywhere agreed that the fact that the other party 
knows there is an undisclosed principal in existence does not charge 
him with the duty of then finding out who he is and giving the credit to 
him alone. 3 

The utmost effect which the knowledge of an existing but unnamed 
principal would seem to have would be to make it easier, as a mere mat^ 
ter of fact, for the other party to elect, at the time of the transaction, 
by some unequivocal means, to deal with the agent only, to the exclu- 
sion of any principal named or unnamed. 4 

1754. What constitutes an election. It is impossible to lay 
down any hard and fast rule by which it can/in all cases, be determined, 
what constitutes an election until there is agreement as to what is 
meant by election. The other party may, of course, by some express 
and unequivocal act, done with that direct intent, declare his purpose to 
treat the agent only as his debtor in such a manner as to leave no room 
for doubt; but, in the majority of the cases, the intention of the other 
party is to be gathered from his words and conduct, and the various 
circumstances which surround the case. If the case were one of ordi- 
nary election, any act which unequivocally indicated a purpose to pur- 
sue either the principal or the agent would suffice ; 5 but it is quite clear 
that we are not dealing with an ordinary case at all. This will be evi- 
dent from a consideration of the cases which have actually been de- 
cided, distinguishing between what is done before and what is done 
after the discovery of the principal. 

9 5 Q. B. Div. 414. 4 This seems to be the ground upon 

1 See ante, 1743. which certain inconclusive cases, like 

2 See, e. g. Merrill v. Kenyon, 48 Jablon v. Traynor, 135 N. Y. Supp. 
Conn. 314, 40 Am. Rep. 174; Raymond 545, are to be based. 

v. Crown, etc., Mills, 2 Mete. (Mass.) There is good discussion of "elec- 

319. tion" by Lord Blackburn, in Scarf v. 

A See Thomson v. Davenport; Ray- Jardine, 7 App. Gas. 345. 
mond v. Crown, etc., Mills. 

1334 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/55 

1755. I. Before discovery of principal. As has already been 
pointed out, any act done before knowledge of the principal, unless it 
amounts to an absolute discharge, extinction or merger of the debt, 
cannot amount to such an election to charge the agent as will release 
the principal when discovered. 

Thus it has been held, the taking of an agent's promissory note or 
acceptance for the price of goods sold to him by one who knew he was 
acting as agent but who did not know for whom, will not conclude the 
seller from holding the principal also when subsequently discovered, 
nor will the fact that the vendor charged the goods to the agent, 7 or 
sent him a statement of the account made out in his name, 8 supposing 
him to be the principal, prevent the vendor from subsequently charging 
the real principal when ascertained to be such. 

The commencement of an action against the agent, before knowl- 
edge, cannot be deemed an election ; 9 and even the recovery of a judg- 
ment against the agent, before discovery of the principal, has been 
held not to be a bar to an action against the principal when discovered 
unless the principal discharges the judgment against the agent. 10 This 
latter holding may, perhaps, be open to question, not because the re- 
covery of judgment constitutes an election but upon the ground of mer- 
ger. 11 

e Merrill v. Kenyon, 48 Conn. 314, (N. Y.), 353; Steele-Smith Grocery 

40 Am. Rep. 174. See also, Harper v. Co. v. Potthast, 109 Iowa, 413. 

Tiffin Nat. Bank, 54 Ohio St. 425. "If Filing claim and having it allowed 

the vendor on a sale made to an against estate of bankrupt agent be- 

agent, take the promissory note of fore discovering principal, does not 

the agent for the amount of the pur- preclude following the principal af- 

chase, on failure of payment by the ter he is discovered. Sweeney v. 

agent, the principal would be equally Douglas Copper Co., 149 N. Y. App. 

liable to an action by the vendor, Div. 568. 

founded upon the original considera- 10 Greenburg v. Palmieri, 71 N. J. 

tion, as if the note had been given by 369, 8 Ann. Gas. 1024, 6 L. R. A. (N. 

the principal himself." Keller v. L. 83; Lindquist v. Dickson, 98 Minn. 

Singleton, 69 Ga. 703. S.) 729; Brown v. Reiman, supra. 

7 Yates v. Repetto, 65 N. J. L. 294. " This question of merger is not 
See also, Raymond v. Crown, etc., easy to dispose of. How many con- 
Mills, 2 Mete. (Mass.) 319; French tracts are there? Is there the visible 
v. Price, 24 Pick. (Mass.) 13; Guest contract of the agent and another, 
v. Burlington Opera House Co., 74 invisible, contract of the principal? 
Iowa, 457. Is there but one contract either of 

s Henderson v. Mayhew, 2 Gill the principal or of the agent at the 

(Md.), 393, 41 Am. Dec. 434. election of the other party? Is there 

9 Brown v. Reiman, 48 App. Div. but one contract upon which prinei- 

295; Ranger v. Thalmann, 39 Misc. pal and agent may be held jointly, as 

420; Remmel v. Townsend, 83 Hun is said in several of the cases cited in 

1335 



I75^- I 758] THE LAW OF AGENCY [BOOK IV 

1756. II. After discovery of principal. After knowledge of the 
existence and identity of the principal comes to the other party, he is 
in a position to choose between the principal and the agent. All of the 
aspects of election are at once presented. If it be treated merely as a 
matter of choice, the question is, when has a choice been indicated. 
Treating the election in the manner suggested, however, the question 
becomes : What acts of the other party, in view of the liability of both 
principal and agent, manifest an intention not to hold the principal? 
A number of situations have been considered in this connection. 

I 757 Presenting claim. In one case, 12 after the discov- 
ery of the principal, the creditor filed a claim against the estate of the 
agent who had become insolvent. The proof was sent by mail. "Al- 
most immediately" after this had been posted, the creditor's attorneys, 
fearing that the presentation of this claim might prejudice the demand 
against the principal, sent a telegram to stop its presentation, but the 
telegram arrived too late as the proof had already been filed. Nothing 
further, however, was done under it and no dividend was ever received. 
As a mere matter of election, many cases could be imagined wherein 
the filing of such a claim would be enough. Considered as evidence of 
an intention not to hold the principal, it could be strongly urged that 
merely keeping the claim alive against the agent was slight, if any, evi- 
dence that the creditor did not intend to follow the principal also. It 
was held not to be conclusive evidence, as a matter of law, of an inten- 
tion to treat the agent as the only debtor. The argument was that, as 
the mere commencement of an action against the agent was not conclu- 
sive, the filing of the claim, which was less than the commencement of 
an action, ought not to be. 

1758. Commencement of action. As suggested in the 

preceding case, the mere commencement of an action against the agent, 
although this act is often regarded as an election in other fields, is not 

a following note? Here are obvious- the estate of the Insolvent agent and 
ly, but in a different form, the same received a small dividend upon it. 
questions which arise under the doc- Held, that this did not defeat his ac- 
trine of election. See the (dissent- tion against the principal, 
ing) opinion of Lord Penzance, In In Hoffman v. Anderson (1902), 112 
Kendall v. Hamilton, 4 App. Gas. 504. Ky. 893, the claim was presented 
12 Curtis v. Williamson (1874), L. first against the estate of the princl- 
R. 10 Q. B. 57. In Jones v. Johnson pal and a small dividend received. 
(1888), 86 Ky. 530, while the creditor Held, that this did not prevent a sub- 
had an action pending against the sequent proceeding against the agent 
principal, he filed a claim against 



CHAP. V] 



LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1758 



here deemed to constitute a conclusive election as a matter of law, 13 
whatever may be its force as evidence of an election as a matter of fact. 
There is, moreover, as has been seen, authority for saying that principal 
and agent may be simultaneously sued severally, and possibly even 
jointly. 14 



is Ferry v. Moore, 18 111. App. 135; 
Curtis v. Williamson, supra; Ray- 
mond v. Crown, etc., Mills, 2 Mete. 
(Mass.) 319; Weil v. Raymond, 142 
Mass. 206, 213; Cobb v. Knapp, 71 N. 
Y. 348, 27 Am. Rep. 51. 

In Raymond v. Crown, etc., Mills, 
supra, the creditor took out a writ 
against the agent before discovering 
the principal; before the writ was 
served he discovered the principal 
and inserted his name also, and the 
writ was thus served; later the cred 
itor discontinued as to the agent. 
Held, not as matter of law to defeat 
the action against the principal. See 
also, McLean v. Sexton, 44 App. Div. 
520; Tew v. Wolfsohn, 77 App. Div. 
454; Gay v. Kelley, 109 Minn. 101, 26 
L. R. A. (N. S.) 101. 

In Barrell v. Newby, 62 C. C. A. 
382, 127 Fed. 658, the other party had 
sued the agent and attached or gar- 
nished funds of his, which suits were 
still pending and plaintiff claimed 
the right to proceed under them, 
though no money had yet been re- 
alized; they had also "elected to ap- 
ply and did apply" certain funds in 
their hands belonging to the agent 
upon their claim. It was held that 
this action was an election. The 
court takes a more narrow view of 
election than is taken in several other 
cases. 

i* In Pollock on Contracts (7th ed. 
p. 105, Williston's Wald's Pollock p. 
116) it is said: "When it is said that 
he [the other party] has a right of 
election this means that he may sue 
either the principal or the agent or 
may commence proceedings against 
both but may only sue one of them 
to judgment; and a judgment ob- 



tained against one, though unsatis- 
fied, is a bkr to an action against the 
other." 

In McLean v. Sexton, 44 App. Div. 
520, [an action to foreclose a me- 
chanic's lien] it is held that, under 
the 'New York code at least, both 
principal and agent may be sued in 
the same action. This, however, 
must be taken in connection with 
what is there said to be the rule in 
New York, that prosecuting the ac- 
tion against either to judgment is not 
an election. 

In Tew v. Wolfsohn, 77 App. Div. 
454, it is said: "Assuming that the 
plaintiff is only entitled to judgment 
against one of the defendants and 
that he must elect which party he in- 
tends to hold, he cannot be required 
to make that election until the close 
of the case." This case was affirmed 
in the court of appeals, Tew v. Wolf- 
sohn, 174 N. Y. 272, though that court 
declined to treat it as a case of un- 
disclosed principal. The dissenting 
opinion of Cullen, J., discusses the 
general question quite fully. But in 
Cherrington v. Burchell, 147 App. Div. 
16, the right to sue jointly is denied. 

In Gay v. Kelley, 109 Minn. 101, 26 
L. R. A. (N. S.) 742, it is held that 
while prosecuting the action to judg- 
ment against one of the parties 
would be an election, where done with 
full knowledge, still where -the al- 
leged principal denies that he was 
such, the other party may join both 
in one action and cannot be compelled 
to elect until the close of the testi- 
mony. In Mussenden v. Raiffe, 131 
111. App. 456, it is said that the 
plaintiff may join both but must dis- 
continue as to one before judgment. 



1337 



1759] 



THE LAW OF AGENCY 



[BOOK iv 



I 759- Taking judgment against agent. Prosecuting the 

action to judgment against the agent, after discovery of the principal, 
has been held in several cases to constitute an election as a matter of 
law. 15 As a mere matter of ordinary election, this is undoubtedly sound ; 
as a matter of a possible merger it may also be sound ; but if election be 
treated in the manner which has been suggested it cannot well be said 
that changing the form qf the agent's obligation, or putting it into a con- 
dition in which it can be more readily enforced, is inconsistent with an 
intention to proceed against the principal also. Nothing' short of satis- 
faction of the judgment against the agent would then release the prin- 
cipal as a matter of law, and some cases have so held. 16 



In Coaling Co. v. Howard, 130 Ga. 
807. 21 L. R. A. (N. S.) 1051, a joint 
action against several principals, only 
one of whom was disclosed at the 
time of contracting, was permitted. 
There was no discussion of the ques- 
tion. 

In Weil v. Raymond, 142 Mass. 206, 
it is said that while the third party 
may proceed against each separately 
(though not after judgment against 
one) he cannot sue both jointly. 

In Pittsburg Plate Glass Co. v. 
Roquemore (Tex. Civ. App.), 88 S. W 
449, it is said that if the other party 
sues the agent who then discloses his 
principal and the plaintiff brings him 
into the action, the plaintiff must 
then elect against which one he will 
ask for judgment. 

Priestly v. Fernie (1865), 3 H. 
& C. 977; Kingsley v. Davis (1870), 
104 Mass. 178; Weil v. Raymond, 142 
Mass. 206 (dictum) ; Tuttill v. Wilson, 
90 N. Y. 423; per Lord Ch. Cairns in 
Kendall v. Hamilton, L. R. 4 App. 
Cas. 504; Sessions v. Block, 40 Mo. 
App. 569; Lindquist v. Dickson, 98 
Minn. 369, 8 Ann. Cas. 1024, 6 L. R. 
A. (N. S.) 729; Codd Co. v. Parker, 
97 Md. 319; Murphy v. Hutchinson, 
93 Miss. 643, 17 Ann. Cas. 611, 21 L. 
R. A. (N. S.) 785; Semisch v. Guen- 
ther, 10 Br. Col. L. R. 371; Hoffman v. 
Anderson, 112 Ky. 873. See also 
Coles v. McKenna, 80 N. J. L. 48. 

is Beymer v. Bonsall, 79 Pa. 298. 



This has been said to be the rule in 
New York: McLean v. Sexton, 44 App. 
Div. 520: Tew v. Wolfsohn, 77 App. 
Div. 454, largely upon such approval 
of Beymer v. Bonsall as is to be 
found in Cobb v. Knapp, 71 N. Y. 348, 
27 Am. Rep. 51; and First Nat. Bank 
v. Wallis, 84 Hun, 376, neither one 
precisely in point. But it seems to 
be denied in Cherrington v. Burchell, 
147 App. Div. 16. Maple v. Railroad 
Co., 40 Ohio St. 313, 48 Am. Rep. 685, 
so holds but it was an action of tort. 
Beymer v. Bonsall is disapproved in 
Barrell v. Newby, 62 C. C. A. 382, 127 
Fed. 656. 

As strong a statement, probably, as 
has l:een made against this view is 
that of Lord Chancellor Cairns, in 
Kendall v. Hamilton, 4 App. Cas. 504 
(a case of partnership). He said: 
"Now, I take it to be clear that, 
where an agent contracts in his own 
name for an undisclosed principal, 
the person with whom he contracts 
may sue the agent, or he may sue the 
principal, but if he sues the agent 
and recovers judgment, he cannot af- 
terwards sue the principal, even al- 
though the judgment does not result 
in satisfaction of the debt If any 
authority for this proposition is need- 
ed, the case of Priestly v. Fernie, 3 
H. & C. 977, may be mentioned. But 
the reasons why this must be the case 
are, I think, obvious. It would be 
clearly contrary to every principal of 



1338 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



1760. Taking agent's note. The effect of taking the 

agent's promissory note or bill of exchange, after the discovery of the 
principal, for a debt contracted before, is involved in some uncertainty. 
If the paper be expressly taken as payment, no question could ordina- 
rily arise. In a few States the paper is presumptively taken as payment, 



justice that the creditor who had 
seen and known and dealt with and 
given credit to the agent, should be 
driven to sue the principal if he does 
not wish to sue him, and, on the other 
hand, it would be equally contrary to 
justice that the creditor on discover- 
ing the principal, who really has had 
the benefit of the loan, should be 
prevented suing him if he wishes to 
do so. But it would be no less con- 
trary to justice that the creditor 
should be able to sue first the agent 
and then the principal, when there 
was no contract, and when it was 
never the intention of any of the par- 
ties that he should do so. Again, if 
an action were brought and judgment 
recovered against the agent, he, the 
agent, would have a right of action 
for indemnity against his principal, 
while, if the principal were liable 
also to be sued, he would be vexed 
with a double action. Farther than 
this, if actions could be brought and 
judgments recovered, first against the 
agent and afterwards against the prin- 
cipal, you would have two judgments 
in existence for the same debt or 
cause of action; they might not nec- 
essarily be for the same amounts, 
and there might be recoveries had, or 
liens and charges created, by means 
of both, and there would be no mode, 
upon the face of the judgments, or 
by any means short of a fresh pro- 
c^eding, of shewing that the two 
judgments were really for the same 
debt or cause of action; and that sat- 
isfaction of one was, or would be, sat- 
isfaction of both." [But in Judd Lin- 
seed Oil Co. v. Hubbell, 76 N. Y. 543, 
it was held that it was merely an ir- 
regularity if two separate judgments 
for slightly different amounts were 



taken against two partners respec- 
tively.] 

The opinion in Beymer v. Bonsall, 
79 Penn. 298, which is the leading 
case on the other side, is very brief 
and was per curiam. The court said : 
"Undoubtedly an agent who makes a 
contract in his own name without dis- 
closing his agency is liable to the 
other party. The latter acts upon his 
credit and is not bound to yield up 
his right to hold the former personal- 
ly, merely because he discloses a prin- 
cipal who is also liable. The princi- 
pal is liable because the contract was 
for his benefit, and the agent is bene- 
fitted by his being presumably the 
creditor, for there can be but one 
satisfaction. But it does not follow 
that the agent can afterwards dis- 
charge himself by putting the creditor 
to his election. Being already liable 
by his contract, he can be discharged 
only by satisfaction of it, by himself 
or another. So the principal has no 
right to compel the creditor to elect 
his action, or to discharge either him- 
self or his agent, but can defend his 
agent only by making satisfaction for 
him." 

In McLean v. Sexton, 44 App. Div. 
520, after quoting with approval the 
rule in Pollock's Contracts that the 
other party may sue either principal 
or agent or may commence proceed- 
ings against both, but may sue only 
one of them to judgment, it is said: 
"If they may be sued in separate ac- 
tions, there is no good reason why 
both the principal and agent who are 
liable for a debt should not be sued 
in the same action. Both will be dis- 
charged by the satisfaction of the 
debt, and neither can be discharged 
without it." 



1339 



I76l,I/62j THE LAW OF AGENCY [BOOK IV 

and would ordinarily release the principal. 17 In the majority of the 
States, however, the paper is not presumptively payment and such a 
conclusion would not follow. 18 In a case 10 in Massachusetts, where a 
note is presumptively payment, the court said : "If the plaintiff, knowing 
O. to be the agent of the defendant, accepted his note in payment for 
property sold to the defendant, intending to receive it as payment and 
to give exclusive credit to O., it would operate as payment ; and he could 
not thereafter fall back upon the defendant for the price of the prop- 
erty, although the note of O. should be dishonored." This, however, 
was not a case of undisclosed principal at all, but of election between a 
known principal and a known agent tendering his individual responsi- 
bility, a case which may be analogous but is not identical. In a simi- 
lar case 20 in Missouri, where a note is held to be not presumptively pay- 
ment, 21 it was said that "where the creditor with knowledge of the prin- 
cipal's liability sees fit to take the individual note of the agent, without 
taking, at the time of the transaction, any steps indicative of an intent to 
hold the principal, this is equivalent to a discharge of the principal as 
a matter of law." Considering that these two rules were inconsistent, 
the court in a later case suggested that the conclusion in the agency case 
might perhaps be regarded as an exception to the previous more general 
rule. 22 

On the principle of election suggested, while the taking of the agent's 
note may have some effect as evidence, it is difficult to see why, unless 
actually taken as payment, it should operate as matter of law to dis- 
charge the principal. 

1761. Charging goods to agent. A fortiori would there 

be no release merely because the goods were charged, or a bill made 
out, to the agent after the discovery of the principal. 23 

1762. Mere delay Statute of limitations. The question 

of the effect of delay is not easily dealt with. Delay reasonably leading 

17 Paige v. Stone, 10 Mete. (Mass.) bone v. Tucker, 15 Wend. (N. Y.) 

160, 43 Am. Dec. 420; Wilkins v. Reed, 498; Muldon v. Whitlock, 1 Cow. (N. 

6 Greenl. (Me.) 220, 19 Am. Dec. 211; Y.) 290, 13 Am. Dec. 533. 

French v. Price, 24 Pick. (Mass.) 13; " Perkins v. Cady, 111 Mass. 318. 

Green v. Tanner, 8 Mete. (Mass.) 20 Ames Packing & Prov. Co. v. 

411; Chapman v. Durant, 10 Mass. Tucker, 8 Mo. App. 95. 

47; Tudor v. Whiting, 12 Mass. 212. 21 Commiskey v. McPike, 20 Mo. 

is See Atlas S. S. Co., v. Columbian App. 82. 

Land Co., 42 C. C. A. 398, 102 Fed. 22 Schepflin v. Dessar, 20 Mo. App. 

358, where the question is fully dis- 569. 

cussed though the case was not really 23 Dyer v. Swift, 154 Mass. 159; 

one of undisclosed principal. Rath- Gardner v. Bean, 124 Mass. 374. 

1340 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1763-1765 

to and followed by a detrimental change of position would bar recovery ; 
but unless it thus results in an alteration of the situation it seems quite 
certain that no ordinary delay in seeking to charge the principal will, as 
a matter of law, operate to release him. But a delay so long that all 
right of action against the agent is barred by the statute of limitations, 
will, it is held, ordinarily bar a recovery against the principal. 24 

1763. Intermediate party must have been agent and not princi- 
pal. Where it is sought to hold one as undisclosed principal, for 
example for goods bought, it is essential that the intermediate party 
through whom the goods were secured shall have been an agent of the 
principal sought to be held and not his vendor. 25 Thus, for illustration, 
if A orders goods of B as seller, but B, not happening to have them on 
hand, buys them in his own name of C -and supplies them to A, A will 
not be liable to C as undisclosed principal if B fails to pay C. A would 
not be liable to C in such a case if he had been disclosed. There was no 
agency and no principal disclosed or undisclosed. 

The same doctrine would, of course, apply to other cases than the 
sale of goods to leasing, borrowing, employing, and the like. 

1764. Alleged agent must have been really such. It must be 
kept in mind that the rules here considered contemplate the actual ex- 
istence of authority from a principal, though he be not disclosed. There 
is no more warrant for holding an undisclosed party liable for acts 
which he did not authorize than there is for holding a disclosed party 
in such a case. In fact there is often much less warrant. It is therefore 
an indispensable part of the plaintiff's case to show that the alleged 
principal was really such as to the act in question. 26 

1765. It must also usually appear that the fact that the 

undisclosed principal was undisclosed was not so far in violation of 
his authority or consent as to practically destroy the agency. An au- 
thority to contract for the purchase of goods, for example, in the prin- 
cipal's name and upon his credit only, can ordinarily not be deemed 
to warrant a contract in the agent's name and upon his credit. It is, of 

2* In Gay v. Kelley, 109 Minn. 101, 383, 37 Am. Rep. 369; Consol. Safety 

26 L. R. A. (N. S.) 742, a delay for Pin Co. v. Humbert, 128 N. Y. Supp. 

a year was held not conclusive, and 710. 

a verdict against the principal was 2 Young v. Inman, 146 Iowa, 492; 
upheld. Delay until action against Moline v. Neville, 38 Neb. 433; Dick- 
agent is barred by statute of limi- erson v. Rogers, 114 N. Y. 405; Mc- 
tations bars action against principal. Kenna v. Stayman Mfg. Co., 112 N. 
Ware v. Galveston City Co., Ill U. S. Y. Supp. 1099; Edwards v. Annan 
170. (Tex. Civ. App.), 127 S. W. 299; Harp- 

25 See Stoddard v. Ham, 129 Mass. er v. Sinclair, 7 Wash. 372. See also, 

1341 



i;66, 1767] THE LAW OF AGENCY [BOOK IV 

course, true that custom, or the distinction between instructions and 
authority, 27 or ratification with knowledge, may affect the matter, but 
in the absence of some element of that nature the rule must be as stated. 

1766. Where goods are bought upon credit it must also 

be usually a part of the plaintiff's case that a purchase upon credit was 
authorized, subject to the qualifications mentioned in the preceding par- 
agraph. A principal who supplies an agent with funds with which to 
buy and pay for goods can not, it is held, ordinarily be made liable where 
the agent, concealing the principal, buys the goods upon his own credit 
and makes some other disposition of the money. 28 

Moreover there can ordinarily in such a case be no ratification of 
which the other party may avail himself, in view of the rule denying 
ratification by an undisclosed principal. 

1767. "Apparent" authority. Granting that an agency 

actually exists, it is held that the usual incidents attach to it, and, 
among others, that the undisclosed principal is liable for acts which 
fall within the usual scope of such an agency, even though the principal 
may have given private instructions to the contrary. Thus where the 
defendants put an agent in charge of their business to be carried on in 
his own name and gave him authority to buy certain classes of goods 
but instructed him not to buy other appropriate classes because they 
would furnish these goods themselves, it was held that defendants were 
nevertheless liable to the plaintiff for the price of goods of the forbid- 
den class bought by the agent, although the plaintiff at the time of the 
sale knew nothing of the agency and supposed the agent to be the prin- 
cipal. 28 Wills J., said: "Once it is established that the defendant was- 

Pitkin v. Benfer, 50 Kan. 108, 34 Am. of the disclosed principal see ante, 

St. Rep. 110; Brown v. Tainter, 114 913, 914. 

N. Y. App. Div. 446. 29 Watteau v. Fenwick, [1893] 1 Q. 

27 Thus, in the converse case, it is B. 346. Followed in Kinahan v. 
held that the principal may be liable, Parry, [1910] 2 K. B. 389, distinguish- 
although he instructed the agent to ing Daun v. Simmins, 41 L. T. 782. 
buy in his (the agent's) own name, But see, Kinahan v. Parry, [1911] 1 
the seller being ignorant of the spe- K. B. 459; Edmunds v. Bushell, L. R. 
cial instructions. Perth Amboy Mfg. 1 Q. B. 97, was relied upon, where 
Co. v. Condit, 21 N. J. L. 659. See Cockburn, C. J., said: "If a person 
also, Calder v. Dobell, L. R. 6 C. P. employs another as an agent in a 
486. character which involves a particular 

28 Laing v. Butler, 37 Hun (N. Y.), authority, he cannot by a secret res- 
144; Fradley v. Hyland, 37 Fed. 49, ervation divest him of that author- 
2 L. R. A. 749; Harder v. Continental ity." Watteau v. Fenwick is followed 
Printing Co., 64 N. Y. Misc. 89 in Brooks v. Shaw, 197 Mass. 376. 

For the ordinary rule in the case 



CHAP. V] 



LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 



the real principal. The ordinary doctrine as to principal and agent ap- 
plies that the principal is liable for all the acts of the agent which are 
within the authority usually confided to an agent of that character, not- 
withstanding limitations, as between the principal and the agent, put 
upon that authority. It is said that it is only so where there has been a 
holding out of authority which cannot be said of a case where the per- 
son supplying the goods knew nothing of the existence of a principal. 
But I do not think so. Otherwise, in every case of undisclosed princi- 
pal, or at least in every case where the fact of there being a principal 
was undisclosed, the secret limitation of authority would prevail and 
defeat the action of the person dealing with the agent, and then discov- 
ering that he was an agent and had a principal." A number of other 
cases have adopted similar views, as will be seen from the note. 

1768. This doctrine, however, has been severely criti- 
cised. 30 It has been thought by some to be merely one more extension 
of a confessedly anomalous principle. It clearly can not be sustained 



A similar conclusion had previously 
been reached in Hubbard v. Tenbrook 
(1889), 124 Pa. 291, 10 Am. St. Rep. 
585, 2 L. R. A. 823. In this case an 
agent had been put forward to man- 
age a business apparently as owner 
but with instructions not to buy 
goods' on credit. He did so buy of 
plaintiff and his principal was held 
liable. Mitchell, J., said: "We have 
thus the question presented whether 
an agent can be put forward to con- 
duct a separate business in his own 
name, and the principal escapes lia- 
bility by a secret limitation on the 
agent's authority to purchase. The 
answer is not at all doubtful. A man 
conducting an apparently prosperous 
and profitable business obtains credit 
thereby, and his creditors have a 
right to suppose that his profits go in- 
to his assets for their protection in 
case of a pinch or an unfavorable 
turn in the business. To allow an 
undisclosed principal to absorb the 
profits, and then when the pinch 
comes, to escape responsibility on the 
ground of orders to his agent not to 
buy on credit, would be a plain fraud 
on the ruLlic. No exact precedent 



has been cited. None is needed. The 
rule so vigorously contended for by 
the plaintiff in error that those deal- 
ing with an agent are bound to look 
to his authority is freely conceded, 
but this case falls within the equally 
established rule that those clothing an 
agent with apparent authority, are, 
as to parties dealing on the faith of 
such authority, conclusively estopped 
from denying it." Hubbard v. Ten- 
brook was followed in Cracken v. 
Hamburger, 139 Pa. 326; Ernst v. 
Harrison, 86 N. Y. Supp. 247; Lamb 
v. Thompson, 31 Neb. 448; Patrick v. 
Great Falls Merc. Co., 13 N. D. 12; 
Napa Valley Wine Co. v. Cassanova, 
140 Wis. 289; Mississippi Valley 
Const. Co. v. Abeles, 87 Ark. 374; and 
Allison v. Sutlive, 99 Ga. 151, are to 
the same effect. 

30 For example, by Mr. Ewart in his 
book on Estoppel pp. 246-248; by 
the Solicitors' Journal, Vol. 37 p. 280; 
in 10 Columbia Law Review, p. 763. 
It is doubted in 9 Law Quarterly Re- 
view, p. 111. The court in Watteau 
v. Fenwick did not cite, or apparently 
have their attention called to, Miles 
v. Mcllwraith (1883), 8 App. Cas. 120, 



rauH 



1343 



i?68] 



THE LAW OF AGENCY 



[BOOK iv 



upon the ordinary principles of estoppel as applied to agency. The 
person in charge did not appear to be an agent but an owner. If the 
question had been what an ostensible owner may do, it would be easier 
of solution. If he had attempted to deal with the goods, or even pos- 
sibly to get credit in reliance upon their ownership, 31 there might be 



and although the precise issue wag 
not the same the general question 
was similar and there is much in the 
opinions in the cases not easy to 
reconcile. Miles v. Mcllwraith was 
an action for a penalty brought un- 
der a statute imposing penalties up- 
on any one who being in the public 
service should be interested in a pub- 
lic contract. Defendant was a mem- 
ber of a Colonial legislature. The 
colony was about to lease boats. De- 
fendant was part owner of a number 
of steamships for which a certain 
firm (the agents herein) were agents. 
This firm proposed to offer boats to 
the government and, In order not 
to involve defendant, he required the 
agents not to offer any ships in which 
he was interested as part owner. 
With reference to one ship in particu- 
lar it was agreed that the agents 
should lease her at a rent independ- 
ent of any they might obtain on a 
lease to the government. In violation 
of the directions the agents leased 
this ship to the government on be- 
half of the owners and in such form 
as would bind defendant as one of 
them. The colonial agent who acted 
for the government did not know of 
defendant's connection with the boat. 
It was contended that defendant had 
violated the statute and was subject 
to the penalty. But it was held that 
as defendant would not have been 
liable to the government (since the 
agents violated the instructions and 
there was no apparent authority to 
bind the defendant as he was un- 
known) the defendant was not 
amenable to the statute. A distinc- 
tion may be made here upon the 
ground that the business done was 
not so done with the consent of the 



alleged principal. Daun v. Simmins, 
41 L. T. 783, was not cited in Watteau 
v. Fenwick, but the court in Kinahan 
v. Parry, supra, thought it distin- 
guishable upon the ground that the 
person in charge was known to be 
only a manager. 

In Becherer v. Asher (1896), 23 
Ont. App. 202; Watteau v. Fenwick and 
Miles v. Mcllwraith were considered, 
and it was held that undisclosed prin- 
cipals who had employed an agent to 
carry on business (in a store rented 
by him) for the sale of their goods 
in his name (his authority being lim- 
ited to the sale of goods supplied by 
his principals and his compensation 
being what he obtained for them 
above invoice prices), were not liable 
for goods purchased by him in his 
own name and which he added to the 
stock in the store. Watteau v." Fen- 
wick was distinguished on the ground 
that there the agent had authority to 
purchase certain goods though he was 
instructed not to buy any of the sort 
which he did buy, but here he had no 
authority to buy any goods at all. 
One of the judges said he thought 
that Watteau v. Fenwick was well 
decided; another said: "It has been 
sharply criticised, and, it would seem, 
not without reason." 

31 In several partnership cases it 
has been held that firm creditors of 
an ostensible partnership, composed 
of apparent partners and the actual 
owner, were to be preferred to indi- 
vidual creditors of the actual owner 
upon a theory that the holding out 
the partnership as proprietor of the 
business estopped the owner and 
those claiming under him from set- 
ting up the real situation. Kelly v. 
Scott, 49 N. Y. 595; Thayer v. Hum- 



1344 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [1769-177! 

found analogies which would throw light upon the situation. But the 
question was not one of these but of a purely personal liability. The 
most tenable explanation is probably this : The defendants when they 
put a general agent in charge actually gave him by implication all the 
incidental authorities which usually attend such a managerial position. 
Among these would be authority to buy such goods as those in question, 
which are usually dealt in at such a place. The defendants then sought 
to narrow this actual authority by instructions which were either secret 
or which were designed to limit usual authority and were not made pub- 
lic. Within well settled rules, such limitations are ineffective. 

1769. Right of assignee of other party against principal. 
Where, even before the discovery of the principal, the other party as- 
signs his rights under the contract to a stranger, it is held that the as- 
signee will have the same right to follow the principal when discovered 
which the assignor would have had. 32 

1770. Apparent agent the real principal. As has already been 
pointed out in an earlier section, 33 there may be cases in which the un- 
disclosed principal proves to have been no other than the alleged agent 
himself. In such a case, unless it can be said that the terms of the con- 
tract are so explicit as to exclude his liability, there seems to be no rea- 
son why he may not be held. 

1771. Excluding principal's liability by terms of contract. In 
Humble v. Hunter, 34 where by the terms of the contract, one who was 

phrey, 91 Wis. 276, 51 Am. St. Rep. 82 Berry v. Chase, 102 C. C. A. 572, 

887, 30 L. R. A. 549; Van Kleeck v. 179 Fed. 426. 

McCabe, 87 Mich. 599, 24 Am. St. Rep. Ante, 1403. Compare Paine v. 

182. See also, Adams v. Albert, 155 Loeb, 37 C. C. A. 434, 96 Fed. 164. 

N. Y. 356, 63 Am. St. Rep. 675; Cod- 3*12 Q. B. 310. Followed in Form- 

ville v. Smart, 15 Ont. L. Rep. 357. by Bros. v. Formby, 102 L. T. Rep. 

Also, Ex parte Hayman, 8 Ch. Div. 11, 116. Compare Schmaltz v. Avery, 16 

where, under the English Bankruptcy Q. B. 655; Sharman v. Brandt, L. R. 

Act, it was held that property of 6 Q. B. 720; Harper & Co. v. Vigers, 

which the firm had the "reputed own- [1909] 2 K. B. 549; Paine v. Loeb, 37 

ership" will be administered as firm C. C. A. 434, 96 Fed. 164; Humble v. 

assets. Hunter is followed in Moore v. Ce- 

To the contrary, on the theory that ment Co., 121 N. Y. App. Div. 667. 

estoppel in such cases is purely per- See also, Winchester v. Howard, 97 

sonal, see Broadway Nat. Bank v. Mass. 303, 93 Am. Dec. 93. 

Wood, 165 Mass. 312; Himmelreich v. In Brown v. Tainter, 114 N. Y. 

Shaffer, 182 Pa. 201, 61 Am. St. Rep. App. Div. 446, where money was 

698; Swanson v. Sanborn, 4 Woods, loaned upon the note of one person, 

625, Fed. Cas. 13,675; Johnson v. Wil- endorsed by another, now sought to 

liams, 111 Va. 95, 31 L. R. A. (N. be held as an undisclosed principal, 

S.) 406. the majority of the court held that 

85 1345 



1772] THE LAW OF AGENCY [BOOK iv 

actually an agent but ostensibly a principal described himself in a char- 
ter-party as the owner, it was held that the undisclosed principal could 
not show that he was the owner and sue upon the contract. Lord Den- 
man said, "You have a right to the benefit you contemplate from the 
character, credit, and substance of the party with whom you contract." 
In Kayton v. Barnett 35 it was held that the undisclosed principal could 
be held, even though, at the time of making the contract, the plaintiff 
had inquired if the defendant was really the buyer and had declared 
that he would not sell the goods if that was the fact. Notwithstanding 
this declaration, said the court, the plaintiff did in fact sell the goods 
to the defendant, although he did not know that he was doing so ; and 
it did not now lie in defendant's mouth to assert that he was not liable 
because he had succeeded in inducing the plaintiff to do that which he 
did not intend to do. This case does not fall within Lord Denman's 
reason, because the plaintiff here was not deprived of any benefit which 
he may have contemplated from the personality of the party with whom 
he ostensibly dealt, he still had that, and the only question was whether 
he might also avail himself of the fact that defendant was the principal. 

But other questions arise. May the terms of the negotiation be used 
to show that the real agent was not dealt with as an agent at all, but 
was the actual as well as the ostensible principal ? If so, there was no 
agency and no undisclosed principal, and hence no room for the appli- 
cation of the doctrine under consideration. 30 Suppose, also, that in a 
formal contract it is made a term that no undisclosed person shall ac- 
quire rights or be subject to liability thereon. May it afterward be as- 
serted that there was, nevertheless, an undisclosed principal who may 
be made liable ? 3T 

1772. Cases in which the agent may not be liable. In practi- 
cally all of the cases thus far considered, it has been assumed that the 
agent was liable upon the contract, and he ordinarily is liable. It is en- 
tirely possible, however, that a contract may be made in such terms as 

the doctrine of the undisclosed prin- Helvetia Ins. Co., 163 Fed. 644, 'It 
cipal could not apply to change "the was held that an undisclosed princi- 
relations established between parties pal could not be held in contradiction 
by their direct personal contracts, of of the terms of the written contract, 
such a character as to exclude the and that therefor where it was pro- 
idea of agency." vided in an insurance policy that cer- 
35 Kayton v. Barnett, 116 N. Y. 625. tain funds only should be liable for 
3 This is apparently the view of claims arising under it, another com- 
the lower court in Kayton v. Bar- pany could not be held as an undis- 
nett, 54 N. Y. Super. Ct. 78. closed principal of the one which is- 
37 in Western Sugar Ref. Co. v. sued the policy. 

1346 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1773 

to exclude his liability, as, for example, where it is expressly made to 
bind an announced but as yet unnamed principal, but is not under any 
circumstances to charge the agent. 

There would seem to be no doubt also that the undisclosed principal 
of an infant agent would be liable like any other, or of a married woman 
at common law or of a slave, as agent. 

There may also doubtless be cases, wherein for some other purely 
personal reason the agent can not be held, in which the principal may 
nevertheless be charged. 

The contract in any such case would not necessarily be void. 



II 

RESPONSIBILITY OF THE PRINCIPAL FOR THE AGENT'S STATEMENTS, 
REPRESENTATIONS AND ADMISSIONS. 

1773. In general. Important and difficult questions arise re- 
specting the power of the agent to affect the principal by the agent's 
statements, representations and admissions, either when made directly 
and ultimately or incidentally and as a concomitant of some other act. 
Such statements, representations and admissions, may be such as af- 
fect the principal's liability in contract or contractual relations, or in 
tort. 

It is, of course, ordinarily true that one person's statements, repre- 
sentations, or admissions can affect himself only ; and, if it be contended 
that they affect some one else, some relation or causal connection be- 
tween the latter and the former which alters this general rule must be 
shown. 

It is also ordinarily true that we do not, in our law, prove facts 
merely by permitting one person to testify to what some other person, 
who is not a party to the proceeding, may have said about them. The 
rules against hearsay usually prevent that. If, then, such statements 
are to be admitted, it is ordinarily essential to show some relation or 
connection between the person speaking and the one against whom his 
utterances are offered, which will take the case out of the ordinary rule. 

The relation or connection which is offered here is that of agency, 
and the question is how far that fact may serve to charge the principal 
with responsibility for the statements of one who, if he were not the 
former's agent, would affect himself alone by what he says. 

1347 



I774-I77 6 ] THE LAW OF AGENCY [BOOK IV 

1774. Agent's authority must be first shown. It is necessary 
to keep constantly in mind in dealing with the subject of the agent's 
statements, representations and admissions that the fact of his agency 
is a condition precedent. Before proof, therefore, can be made of his 
statements, representations or admissions it is essential that the fact 
that he was an agent at the time of making them shall either be admitted 
or be shown by evidence making a prima facie case. 38 

1775. Authority can not be shown by agent's admissions. It 
must also be kept in mind, that, as has been already seen, 39 the fact of 
the agent's authority can neither be established, nor can its scope or 
effect be extended or enlarged, by his own statements, representations 
or declarations, so as to charge the principal. There must be first a 
prima facie showing of his authority by other evidence, before* the ad- 
missions, declarations or representations, if otherwise competent, can 
be admitted. 4 * 

1776. Representations by agent. Representations made by an 
agent may affect his principal in a variety of cases. They may be ex- 
pressly and specifically authorized, and bind the principal because they 
were so authorized. Authority to make them may properly be implied 
from an express authority to do some act or to act in some capacity. An 
agent authorized to lease his principal's house may, by implication, be 
found to have authority to make certain representations respecting it ; 
an agent authorized to sell goods may be found, by implication, to have 
authority to make certain representations respecting their quality, fit- 
ness, and the like. When made as a term of the contract these repre- 
sentations may become warranties and bind the principal as such. This 
subject has already been considered. 41 

False and fraudulent representations by an agent may -affect the prin- 
cipal because he has expressly or impliedly authorized representations 
to be made by the agent and the latter made false and fraudulent ones. 
Even though no representations were contemplated, the principal may 
be affected by the false and fraudulent representations of his agent if 
made in the course of his employment. When they were the induce- 
ment to a contract, the principal, by taking the benefits of the contract, 

: 

*8 See Smith v. Kron, 96 N. C. 392; v. Cryder, 55 N. J. L. 329; Rumbough 

Willcox v. Hines, 100 Tenn. 524, 66 v. Southern Impl. Co., 112 N. C. 751, 
Am. St Rep. 761. vfcftl : 34 Am. St. Rep. 528: Gates v. Max, 

: - See ante, 285. 125 N. C. 139; Summer-row v. Brauch, 

4 See ante, 292; Taylor v. Com- 128 N. C. 202. 
mercial Bank, 174 N. Y. 181, 95 Am. *i See Warranties by Agent 
St. Rep. 564, 62 L. R. A. 783; Dowden 

1348 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1777 

may be often found to have assumed responsibility for the means by 
which it was procured. They may in a proper case justify a rescission, 
or they may be ground for charging the principal in damages. The sub- 
ject will be more fully considered in a later subdivision. 42 

Representations made by an agent, like those made by the principal 
in person, would be subject to the rule excluding all other terms than 
those finally included in a written contract. And the authority of the 
agent to make representations which shall affect his principal may be 
cut off by notice or by express stipulation. 

1777. Principal liable for statements and representations ex- 
pressly authorized. In the first place it may be noted that the prin- 
cipal is of course responsible for the statements and representations 
which he has expressly authorized. It must be kept in mind that the 
speaking of words is as much an act as any other physical manifesta- 
tion, and may be authorized as readily as any other act. In many cases 
the speaking of words may be the very act authorized. In other cases 
the use of words may be the only means by which the end authorized 
can be accomplished. Thus if the principal authorizes an offer to be 
made or accepted, or directs a notice to be given or a demand to be 
made, the speaking of the words which constitute the offer or the ac- 
ceptance or which make up the notice or the demand is the very act 
which the principal has directly and expressly authorized. So if the 
principal authorizes a contract to be made or modified or rescinded or 
any other negotiation to be entered upon or conducted for which the 
use of language is essential, the speaking of the words or the use of the 
language necessary for the accomplishment of the purpose is an act 
done by the direct authority of the principal. A moment's consideration 
will suffice to show in how large a proportion of the cases the act to be 
done by an agent consists of or involves the use of language by the 
agent. If the distinction between an agent and a servant heretofore sug- 
gested be considered, the distinguishing feature of the agent may appear 
to be that he speaks as well as acts for his principal. And when spoken 
language is referred to, it will be obvious that written language is also 
to be included. Written words when appropriate may be just as much 
the direct object of the authority as spoken words. 

In view of these considerations it is evident that there may be oral 
or verbal acts as well as any other, and that the principal will be as re- 
sponsible for a verbal act which he has authorized as he will be for any 
other. 

42 See post, Liability for Fraudulent Acts and Representations. 

1349 



1778] THE LAW OF AGENCY [BOOK IV 

1778. Statements of agent expressly authorized to give, or re- 
ferred to for, information. It is not at all uncommon for the prin- 
cipal to put an agent in a position in which the making of statements 
or representations or the giving of information is the act expressly con- 
templated and directed. Thus if the principal refers a person to his 
agent for information, the agent is clearly authorized to give informa- 
tion for the principal upon the subject indicated. If a principal carry- 
ing on an extensive business establishes a bureau of information, or 
designates an agent to whom inquiries may be referred or of whom in- 
formation may be obtained, the giving of such information or the an- 
swering of such inquiries is an act which the principal has directly au- 
thorized. 

The giving of information or the answering of inquiries in such a 
case must, of course, be confined to the subjects which have actually or 
apparently been confided to him to answer for ; but within that sphere 
persons, expressly or impliedly referred to him, who act in good faith 
and with reasonable prudence may rely upon the information as infor- 
mation given by the principal.* 3 

For similar reasons, if the principal refers a person for information 
to another, though not then his agent, as a person who is authorized to 
speak for the principal and on his account, what, such person says when 
so referred to respecting the matter in question will be admissible, 44 but 
not unless he was referred to as a person authorized to speak on the 
principal's account.* 5 

43 King v. Livingston Mfg. Co., plied to a telephone operator who 

Ala. , 60 South. 143; Craig v. Craig, conducted a conversation between the 

3 Rawle (Pa.), 472, 24 Am. Dec. 390; parties. Oskamp v. Gadsden, 35 Neb. 

Chapman v. Twitchell, 37 Me. 59, 58. 7, 37 Am. St. Rep. 428. 
Am. Dec. 773; Over v. Schiffling, 102 44 Chadsey v. Greene, 24 Conn. 560; 

Ind. 191; Hahl v. Brooks, 213 111. 134; Over v. Schiffling, 102 Ind. 191; 

Gott v. Dinsmore, 111 Mass. 45; Green Chapman v. Twitchell, 37 Me. 59,. 58 

v. Boston, etc., R. Co., 128 Mass. 221, Am. Dec. 773; Armstrong v. Crump, 

35 Am. Rep. 370. See also, cases 25 Okla. 452; Thayer v. Davis, 75 Wis. 

cited in following section: 205. 

Interpreters. When two persons This necessary qualification is 

voluntarily agree upon a third to act made very clear in Rosenbury v. 

as interpreter between them, each Angell, 6 Mich. 508. Here a person 

makes the interpreter his agent to whose financial responsibility was in 

communicate for him with the other, question referred the inquirer to 

and each has the right to rely upon "the business men" of a certain vil- 

what is so communicated as being an lage in another state where he had 

authorized communication. Miller v. formerly lived. Held, that this did 

Lathrop, 50 Minn. 91; Terrapin v. not make competent the statements 

Barker, 26 Okla. 93; Sertant v. Crane of a business man living in that vil- 

Co., 142 111. App. 49. Same rule ap- lage concerning certain specific acts 

1350 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1779 



1779. Statements of agent impliedly referred to for information. 

Instead of being expressly put foward to give information or answer 
inquiries as contemplated in the preceding section, the express author- 
ity of an agent may be directed to some other act, and yet the giving of 
information, the answering of inquiries or the making of other state- 
ments or representations, may be so incidental to the doing of the act 
expressly authorized as fairly to be deemed to be included within the 
scope of the agent's authority. Thus where a passenger by railroad in- 
quired of the baggage-master and the station-master for his trunk, 
which should have come as baggage, it was held that the statements of 
these agents in response to the inquiry were admissible in evidence 
against -the principal. "It was part of the duty of those agents," said 
the court, "to deliver the baggage of passengers, and to account for the 
same, if missing, provided inquiries for it were made within a reason- 
able time. These declarations were therefore made by them as agents 
of the defendants, within the scope of their agency, and while it con- 
tinued." 4e So where a person who proposed to become a passenger on 
defendant's railroad, desiring information respecting the sort of ticket to 

of the person so referring while he to the plaintiffs' demand were made 



lived in that village. Such a refer- 
ence, said the court, could mean no 
more than that the village in ques- 
tion was a place where the inquirer 
could properly make such investiga- 
tions as he desired upon his own ac- 
count; but the declarations of a par- 
ticular resident could not be admis- 
sible unless he had in some wise been 
made agent to speak for the party 
giving the reference, and that "where 
the reference is made to all the busi- 
ness men of a commercial town of 
several thousand inhabitants, with- 
out distinction of name or character, 
the idea of agency becomes too ex- 
travagant to be reconciled with the 
theory of sanity in the party making 
the reference." See also, Aldridge v. 
Aetna L. Ins. Co., 204 N. Y. 83, 38 L. 
R. A. (N. S.) 343. 

46 Morse v. Conn. River Railroad 
Co., 6 Gray (Mass.), 450. To same 
effect see: Lane v. Boston & Al- 
bany Railroad Co., 112 Mass. 455. 
(The court here said: "The declara- 
tions of their freight agent in answer 



in the performance of his duty, and 
therefore rightly admitted in evi- 
dence against the defendants. The 
form in which they were expressed 
might affect the weight which the 
jury would allow them, but did not 
make them inadmissible.") Gott v. 
Dinsmore, 111 Mass. 45; Green v. 
Boston & Lowell Railroad Co., 128 
Mass. 221, 35 Am. Rep. 370; Kivett v. 
West. Un. Tel. -Co., 156 N. Car. 296; 
Rutland v. Southern Ry. Co., 81 S. 
Car. 448; Curtiss v. Avon, etc., Rail- 
road Co., 49 Barb. 148; Baltimore & 
Ohio R. R. v. Campbell, 36 Ohio St. 
647, 38 Am. Rep. 617; Illinois Cent. 
R. Co. v. Tronstine, 64 Miss. 834; 
Lev! v. Missouri, etc., Ry. Co., 157 Mo. 
App. 536; Burnside v. Grand Trunk 
R. R. Co., 3 N. H. 554, 93 Am. Dec. 
474; Lynchburg Tel. Co. v. Bokker, 
103 Va. 594; Central Railroad & 
Banking Co. v. Skellie, 86 Ga. 686; 
McCotter v. Hooker, 8 N. Y. 497. Com- 
pare Lafayette, etc., R. Co. v. Ehman, 
30 Ind. 83. 






1351 



THE LAW OF AGENCY 



[BOOK iv 



purchase in view of certain facts, applied to the ticket agent for infor- 
mation, it was held that he was justified in relying upon the informa- 
tion which the agent gave him, there being nothing to indicate that it 
was unauthorized, and that the company was bound by the information 
so given. Said the court : "The plaintiff desires information. To whom 
shall he go to obtain it ? To whom can he go but to the person appointed 
by the company for the purpose of giving such information and selling 
the proper tickets ?"* 7 So, in general terms, it was said by the supreme 
court of the United States : "The declarations made by an officer or 
agent of a corporation, in response to timely inquiries properly ad- 
dressed to him and relating to matters under his charge, in respect to 
which he is authorized in the usual course of business to give informa- 
tion, may be given in evidence against the corporation." ** 



47 Burnham v. Grand Trunk Ry. 
Co., 63 Me. 298, 18 Am. Rep. 220. 

48 Xenia Bank v. Stewart, 114 U. S. 
224, 29 L. Ed. 101. 

Inquiries made of a station agent by 
one about to load a car, whether there 
were trains coming from which dan- 
ger might be apprehended, are proper, 
and his answers are in the line of his 
duty and admissible. Chicago, etc., 
Ry. Co. v. Cox, 76 C. C. A. 127, 145 
Fed. 157. To same effect, see Bachant 
v. Boston & Maine R. R., 187 Mass. 
392, 105 Am. St Rep. 408. So of 
statements made by a conductor in 
response to inquiries of a passenger 
in regard to the dangerous appear- 
ance of a fellow .passenger. St. 
Louis T. M. &'S. Ry. Co. v. Green- 
thai, 23 C. C. A. 100, 77 Fed. 150; 
statements made by a general freight 
agent, with whom the matter had 
been taken up, that a car in question 
had not been re-iced according to 
contract. Pennsylvania R. Co. v. 
Orem Fruit Co., Ill Md. 356. (To 
same effect: Dean v. Toledo, etc., R. 
Co., 148 Mo. App. 428.) And state- 
ments by a telegraph agent as to 
whether a message had been deliv- 
ered. Garland v. Western Un. Tel. 
Co., 118 Mich. 369, 43 L. R. A. 280. 

Where a person having a claim 
against an express company for lost 



goods is referred from one agent to 
another until he reaches a district 
general manager who takes the mat- 
ter up, the admissions and state- 
ments of the latter are competent. 
Hill v. Adams Express Co., 77 N. J. 
L. 19. Same effect: Adams Express 
Co. v. Berry, 35 App. D. C. 208, 31 L. 
R. A. (N. S.) 309. 

But where an express company was 
sued for the loss of a physician's di- 
ploma, a letter written by the attor- 
ney of the company to the institution 
issuing the diploma, stating that it 
was claimed to be lost in transit and 
making inquiries about obtaining a 
duplicate, etc., is not admissible 
against the company as an admission 
that the company had received and 
lost the diploma. Whiteside v. 
Adams Express Co., 89 Neb. 430. The 
court said that the letter was infor- 
mal, casual, and not written for the 
purpose of any step in the proceed- 
ings. 

So an agent sent by defendant to 
get a statement from plaintiff as to 
his claim is not thereby authorized 
to bind defendant by admissions as 
to the cause of plaintiff's injury. 
Doyle v. St. Paul, etc., Ry. Co., 42 
Minn. 79. But where the purpose of 
what he said was to induce the 
plaintiff's statement "to draw out a 



1352 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1780 



1780. Statements of agent made as incidents of his position 
General manager General agents, etc. Even though the making 
of statements or declarations may not have been expressly authorized, 
they may be authorized by implication because they are the natural and 
ordinary incidents of the position which the agent occupies. Thus a 
person may occupy such a managerial position, for example, that he will 
be constantly called upon, in the performance of his duty, to give di- 
rections, to adjust controversies, reject or accept performance of con- 
tracts, give and receive notices, make and receive admissions, and the 
like, because' all of these things must be done by somebody, and, in the 
case in question the doing of them falls to the person who occupies his 
position. In such a case, the agent's acts in these regards are binding 
upon his principal because they are done by his authority. 49 This is 




statement of any other injuries," 
etc., it may be admissible. McNich- 
olas v. New England Tel. Co., 196 
Mass. 138. 

49 "The rule of law is entirely well 
settled that when an agent is vested 
with authority to perform any busi- 
ness for his principal, his words, his 
verbal acts, in conducting that busi- 
ness and in relation thereto, are the 
acts of the principal and may be 
proved as against the latter." Hup- 
fer v. National Distilling Co., 119 
Wis. 417. 

"A statement made by a general 
agent of a corporation, in the course 
of his employment, as to a fact 
within his official knowledge touch- 
ing the status of a matter entrusted 
to him, is admissible in evidence ou 
behalf of the party with whom the 
corporation was dealing." Agricul- 
tural Ins. Co. v. Potts, 55 N. J. L. 
158, 39 Am. St. Rep. 637. To same 
effect: Pierson v. Atlantic Nat. Bank, 
77 N. Y. 304; Larson v. Metropolitan 
St. Ry. Co., 110 Mo. 234, 33 Am. St. 
Rep. 439. 

"Where a corporation invests an 
agent with general authority to ad- 
just claims against it, the declara- 
tions of that agent made while en- 
deavoring to secure an adjustment 
of the claim are competent evidence 



against his principal." Adams Ex- 
press Co. v. Harris, 120 Ind. 73, 16 
Am. St. Rep. 315, 7 L. R. A. 214. 

The statements of the general 
manager of a railroad concerning the 
condition of the track, which it was 
his official business to know, upon 
being informed of a wreck, are ad- 
missible as the declarations of the 
company whose alter ego he was as 
to this matter. Krogg v. Atlanta, 
etc., R. Co., 77 Ga. 202, 4 Am. St. 
Rep. 79. 

Statements of an agent in charge 
of a business, e, g., an express car- 
rier, as to the loss of goods delivered 
to the carrier for transportation are 
competent. Schmerler v. Barasch, 63 
N. Y. Misc. 267. See also, McCotter 
v. Hooker, 8 N. Y. 497; Fein v. Weir, 
129 N. Y. App. Div. 299, aff'd, 199 
N. Y. 540. 

But they must be confined to losses, 
etc., within the territory over which 
the agent's authority extends. The 
statements of an express agent in 
Atlantic City as to what happened 
in Chicago would not ordinarily be 
competent. Yoshimi v. United States 
Express Co., 78 N. J. L. 281. 

A division superintendent of a 
railroad company is held to have no 
implied authority to answer ques- 
tions or '. make exhibits as to the 



1353 



1781] THE LAW OF AGENCY [BOOK IV 

strikingly true, of course, in the case of such a managing officer or 
agent of a corporation which can speak only through an agent, and this 
is the agent appointed for that purpose. 50 

It is not indispensable in cases of this sort that the agent who thus 
speaks shall have himself been an actor in the transaction of which he 
speaks or that he shall speak of his own personal knowledge." He may 
clearly be the mouthpiece of his principal to speak of that which was 
done by other agents or servants of his principal, or to give informa- 
tion, pass upon or make admissions concerning matters which have 
been reported to him or which he has caused to be investigated. 

Neither is it indispensable in these cases that what he says shall be 
said at the time of or as a part of the act concerning which he speaks. 
It is only essential that it shall be while his authority over the matter 
still continues, and while he is acting in the course of his duty with ref- 
erence to it. 

In both of these respects, this case differs from the one to be consid- 
ered in the next section, though the distinction is frequently not ob- 
served. 

Similar to the case of the general managing agent, is that of the agent 
who has general authority over some matter or in some field. What he 
says with reference to that matter while he is acting upon it and while 
his authority over it still continues may be as binding upon his principal 
as what he does. 

It is indispensable, of course, in all these cases that the one who thus 
speaks as manager or superintendent shall be the one authorized to deal 
with the matter in question, and that what he says shall relate to matters 
which are within his authority. 

1781. Statements of agent made as incident to an authorized 
act Res gestae. Somewhat similar to the cases referred to in the 
preceding section though not resting upon precisely the same ground, 

cause of an injury which has oc- ells Mining Co., 157 Ala 603; Moran 

curred. Huebner v. Erie R. Co., 69 v. Power Co., 29 Wash. 292; Joslyn 

N. J. L. 327. v. Cadillac Auto Co., 101 C. C. A. 77, 

so See also Lynchburg Telephone 177 Fed. 863; Tenhet v. Atlantic 

Co. v. Booker, 103 Va. 594; Virginia Coast Line R. Co., 82 S. Car. 465; 

Chem. Co. v. Knight, 106 Va. 674; Western Un. Tel. Co. v. Yopst, 118 

Myers v. San Pedro, etc., R. Co., 39 Ind. 248, 3 L. R. A. 224; Cleveland, 

Utah, 198; Garfield Coal Co. v. Pa. etc., Ry. v. Closser, 126 Ind. 348, 9 

Coal Co., 199 Mass. 22; Head v. L. R. A. 754. 

Breeders' Club, 75 N. H. 449; Touch- ei Western Un. Tel. Co. v. Yopst, 

berry v. Northwestern R. Co., 88 S. 118 Ind. 248, 3 L. R. A. 224. 
Car. 47; Home Ice Factory v. How- 

J354 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1782 

are the statements, representations, declarations and admissions of an 
agent which may be binding upon his principal because they are a part 
of, or an incident to, some act or business which the agent was author- 
ized to perform. Wherever the doing of a certain act or the transaction 
of a given affair or the performance of certain business is confided to an 
agent, the authority to so act will, in accordance with a general rule 
often referred to, carry with it by implication the authority to do all of 
the collateral acts which are the natural and ordinary incidents of the 
main act or business authorized. 52 The speaking of words, the mak- 
ing of statements, representations, declarations, admissions, and the 
like, may as easily be such an incident as the doing of any other sort 
of act. Their utterance is often described as a verbal act, and they do 
not differ in substance from any other acts. 

Since the authority for the doing of these incidental acts, however, 
springs from the authority to do the main act, it must ordinarily end 
with it. The incidental thing must be a part of the main thing. It must 
occur before the main act is completely ended : it must take place while 
that is still going on. To speak in the unnecessary and confusing Latin 
often used to describe the situation, it must be a part of the res gestce, 
although there is no more reason for using such a phrase to describe 
these verbal acts than any of the other incidental ones which fall within 
the same principle. 

1782. Various statements of the doctrine. This gen- 
eral doctrine has found expression in a great variety of forms. Thus 
in a leading English case 53 it is said : "If P. was the agent of the de- 
fendants, and it was within the scope of his duty and authority as agent 
to do what the principal, if on the spot, would have done, what he says 
while he is so acting is equally admissible as if said by the principal 
himself." In an early case 54 in Maryland the rule is stated thus : 
"Whatever is said by an agent, either in the making a contract for his 
principal, or at the time, and accompanying the performance of any act, 
within the scope of his authority, having relation to, and connected with, 
and in the course of the particular contract or transaction in which he 
is then engaged, is in legal effect, said by his principal, and admissible 
in evidence ; not merely because it is the declaration or admission of an 
agent; but on the ground, that being made at the time of, and accom- 

52 See ante. 715. See also, ap- sa Kirkstall Brewery Co. v. Fur- 
plying the principle to representa- ness Ry. Co., L. R. 9 Q. B. 468. 
tions of agent Conkling v. Stand- 54 Franklin Bank v. Pennsylvania, 
ard Oil Co., 138 Iowa, 596. etc., Co., 11 G. & J. (Md.) 28, 33 Am. 

Dec. 687. 

1355 







THE LAW OF AGENCY 7TI [BOOK IV 



panying the contract or transaction, it is treated as the declaration or 
admission of the principal, constituting a part of the res gestcz, a part 
of the contract or transaction, and as binding upon him as if in fact 
made by himself." In an early case in Maine 5 it is said : "The declara- 



56 Haven v. Brown, 7 Greenl. (Me.) 
421, 22 Am. Dec. 208. 

The following, selected from a 
great number of cases, may serve as 
illustrations of statements, represen- 
tations or admissions held to be ad- 
missible under this rule: Statements 
by bridge tenders as to how they 
preferred to have boats go through 
the draw. Toll Bridge Co. v. Bets- 
worth, 30 Conn. 380; statements 
made by the president of a corpora- 
tion, authorized to sell its land, as 
to where the boundaries were. 
Holmes v. Turner Falls Lumber Co., 
150 Mass. 535, 6 L. R. A. 283; state- 
ments made and letters written by 
the cashier of a national bank while 
acting as such and respecting pay- 
ment of claims left with the bank 
for collection and with reference to 
the ownership of collaterals pledged 
to secure payment of these claims. 
Xenia Bank v. Stewart, 114 U. S. 224, 
29 L. Ed. 101. (But not if made 
while not so acting. Gillespie v. 
First Nat. Bank, 20 Okla. 768); ad- 
missions of an insurance agent with 
reference to the payment of pre- 
miums which it was his duty to col- 
lect and remit. Hall v. Un. Cent. 
L. Ins. Co., 23 Wash. 610, 83 Am. St. 
Rep. 844, 51 L. R. A. 288. To same 
effect: Wright v. Stewart, 19 Wash. 
179; declarations and admissions of 
an agent authorized to receive deliv- 
ery of goods under a contract that 
the goods were in accordance with 
the contract. Des Moines Land Co. 
v. Polk County Homestead Co., 82 
Iowa, 663. To same effect: Worth- 
ington v. Given, 119 Ala. 44, 43 L. R. 
A. 382; Rahm v. Deig, 121 Ind. 283. 
See also, Pittsburg Plate Glass Co. v. 
Kerlin, 58 C. C. A. 648, 122 Fed. 414; 
statements and directions, concern- 



ing materials and the manner of do- 
ing the work, made by an architect, 
put in charge of the construction of 
a building, to the contractor. Wright 
v. Reusens, 133 N. Y. 298; statements 
of an agent who had acted in nego- 
tiating a contract, made pending an 
attempt at settlement between the 
parties concerning it, as to what its 
terms were. St. Louis Wire-Mill Co. 
v. Consol. Barb Wire Co., 46 Kan. 
773; statements made by conductor 
of a car with reference to the pay- 
ment of fare by a passenger, whom 
he ejected and afterwards permitted 
to return, made at the time. Robin- 
son v. Superior Transit Co., 94 Wis. 
345, 59 Am. St. Rep. 897, 34 L. R. A. 
205; or of a ticket inspector as to 
the reason why he rejected a ticket, 
made at the time of the rejection. 
Nichols v. Southern Pac. R. Co., 23 
Ore. 123, 37 Am. St. Rep. 664, 18 L. R. 
A. 55; statements made by an agent 
whose duty it was to have repairs 
made while calling attention to the 
need of repairs and giving directions 
to make them. Bundy v. Sierra 
Lumber Co., 149 Cal. 772; oral and 
written statements made by the 
freight agent of defendant to whom 
the property was delivered for car- 
riage, relating to the investigation 
of the loss and showing that the 
property had been in the company's 
possession. Green v. Boston, etc., R. 
Co., 128 Mass. 221, 35 Am. Rep. 370; 
see also, Illinois Cent. R. Co. v. Trons- 
tine, 64 Miss. 834; statements of an 
agent authorized to cut timber for 
his principal, made while acting as 
such, as to where he cut certain tim- 
ber. Ayres v. Hubbard, 71 Mich. 
594; statements of agents sent to 
erect a range, made while erecting it, 
as to why, owing to its peculiar con- 



1356 



CHAP. V] 



[ 



tions of an agent, so far as they constitute a part of the res gesta, or in 
other words, such as are made by him at the time he is engaged in mak- 



struction, they erected it in a cer- 
tain manner. Wrought Iron Range 
Co. v. Graham, 25 C. C. A. 570, 80 
Fed. 474; statements of the agent in 
charge of a dock, with authority to 
give directions to incoming vessels, 
made to the master of a vessel pro- 
posing to dock there, as to the depth 
of the water. Garfleld Coal Co. v. 
Rockland Line Co., 184 Mass. 60, 
100 Am. St. Rep. 543, 61 L. R. A. 946, 
a statement by an agent authorized 
to employ a domestic servant as to 
the nature of a disease known to 
exist in the principal's family, made 
to quiet the fears of the servant 
about accepting the service. Kliegel 
v. Aitken, 94 Wis. 432, 59 Am. St. 
Rep. 900, 35 L. R. A. 249. The state- 
ment of the agent in charge of a 
station and yards used by two com- 
panies as to which railroad's loco- 
motive passed at a certain time. 
Stroud v. Columbia, etc., Ry., 79 S. 
Car. 447 (the court said it was simp- 
ly a statement of fact, not an admis- 
sion of liability). A statement rec- 
ognizing the existence of a right of 
way over the principal's land made 
by an agent in charge of the land 
and acting as superintendent of a 
mill thereon situated. Bigelow 
Carpet Co. v. Wiggin, 209 Mass. 542, 
a statement made by a factory fore- 
man that an employee was inexperi- 
enced made on the occasion of the 
foreman's transferring the employee 
from one task to another less dan- 
gerous. Comeau v. C. C. Manuel Co., 
84 Vt. 501, the statement of an at- 
torney or other agent in presenting 
a claim for personal injuries as to 
the character of the claim or ex- 
tent of the injury or how the client 
claimed it occurred. Loomis v. New 
York, etc., Ry., 159 Mass. 39; James 
v. Boston Elev. Ry., 201 Mass. 263, 
and, generally, that the statements, 
representations and admissions of 



facts of the agent made while act- 
ing within the scope of his authority 
and in reference to the business 
which he is employed to transact, 
may be received in evidence against 
the principal, see Ball v. Bank of 
Alabama, 8 Ala. 590, 42 Am. Dec. 
649; First National Bank v. Alex- 
ander, 161 Ala. 580; Montgomery- 
Moore Mfg. Co. v. Leith, 162 Ala. 
246; Perkins v. Bennett, 2 Root 
(Conn.), 30; Mather v. Phelps, 2 
Root (Conn.), 150, 1 Am. Dec. 65; 
Willard v. Buckingham, 36 Conn. 
395; Coweta Falls Mfg. Co. v. Rogers, 
19 Ga. 416, 65 Am. Dec. 602; Galcer- 
an v. Noble, 66 Ga. 367; Lindblom 
v. Ramsey, 75 111. 246; Merchants, 
etc., Trans. Co. v. Leysor, 89 111. 42; 
Lafayette, etc., R. R. Co. v. Ehman, 
30 Ind. 83; Mutual Ben. L. Ins. Co. 
v. Cannon, 48 Ind. 264; Louisville, 
etc., Ry. v. Henley, 88 Ind. 535; 
Pennsylvania Co. v. Nations, 111 Ind. 
203; United States Express Co. v. 
Rawson, 106 Ind. 215; Wilson Sew. 
Mach. Co. v. Sloan, 50 Iowa, 367; J. 
I. Case Threshing Mach. Co. v. Fish- 
er, 144 Iowa, 45; Central Branch U. 
P. R. R. Co. v. Butman, 22 Kan. 639; 
Haven v. Brown, 7 Greenl. (Me.) 
421. 22 Am. Dec. 208; Hammatt v. 
Emerson, 27 Me. 308, 46 Am. Dec. 
598; Burnham v. Grand Trunk Ry. 
Co., 63 Me. 298, 18 Am. Rep. 220; 
Franklin Bank v. Pennsylvania, etc., 
Co., 11 Gill & John. (Md.) 28, 33 Am. 
Dec. 687; City Bank v. Bateman, 7 
Har. & J. (Md.) 104; Stiles v. West- 
ern R. R. Co., 8 Mete. (Mass.) 44, 
41 Am. Dec. 486; Tuttle v. Brown, 4 
Gray (Mass.), 457, 64 Am. Dec. 80; 
Zart v. Singer Sew. Mach. Co., 162 
Mich. 387; O'Brien v. N. W. Imp. 
Co., 82 Minn. 136; Dickman v. Wil- 
liams, 50 Miss. 500; Robinson v. 
Walton, 58 Mo. 380; McCormick v. 
Demary, 10 Neb. 515; Union L. Ins. 
Co. v. Haman, 54 Neb. 599; Burn- 



1357 



1783] THE LAW OF AGENCY [BOOK IV 

ing a contract on the part of his principal, and having reference to the 
subject matter of such contract, may be given in evidence to affect his 
principal. They are admitted as the representations of the principal 
himself, whom the agent represents while engaged in the particular 
transaction to which the declaration refers. Representations made by 
an agent, at the time he is contracting for his principal, constitute a 
part of the contract, as much so as if they had been made by the prin- 
cipal ; and a fact stated by an agent in relation to a transaction in which 
he is then engaged, and while it is in progress, forms a part of that 
transaction." 

While these various statements differ more or less in form, they 
agree in this, that the statements here referred to are admissible against 
the principal because they are his acts done by his authorized agent. 
Their admissibility depends upon the law of agency and not upon the 
law of evidence. They are offered as the ultimate fact to be proved 
and not merely as admissions to prove the truthfulness of the facts to 
which they are supposed to refer. 

1783. Limitations upon the rule. Tt will be evident 

from the statement of the rule that it is subject to several limitations 
which must be carefully observed. The statements are admissible be- 
cause it is deemed that the principal, in authorizing the act, has author- 
ized also the statements which are the usual and natural concomitants 
and incidents of the doing of the act itself. In order, therefore, to bind 

side v. Grand Trunk Ry. Co., 47 N. Chorpenning v. Royce, 58 Pa. 474; 

H. 554, 93 Am. Dec. 474; Asl>more v. l.aurens Telephone Co. v. Bank, 90 

Penn. Steam Towing Co., 38 N. J. S. Car. 50: Moore v. Bettis, 11 

L. 13; Anderson v. Rome, etc., R. Humph. (Tenn.) 67, 53 Am. Dec. 

R. Co., 54 N. Y. 334; White v. Mil- 771; St. Louis, etc., Ry. Co. v. Adams, 

ler, 71 N. Y. 118, 27 Am. Rep. 13; 55 Tex. Civ. App. 245; Eddy v. Davis, 

Fein v. Weir, 129 App. Div. 299, 199 34 Vt. 209; Dowdall v. Pennsylvania 

N. Y. 540; Gazzam v. German Un. F. R. R. Co., 13 Blatch. (U. S. C. C.) 

Ins. Co., 155 N. Car. 330; Albert v. 403. 

Mut. L. Ins. Co., 122 N. Car. 92, 65 Where the business on which the 

Am. St. Rep. 693; Needham v. Hal- agent Is engaged is a continuing one, 

verson, 22 N. Dak. 594; Grover v. or is not fully ended by a single act, 

Hawthorne, 62 Ore. 65, 121 Pac. "but requires a series of acts to oom- 

808; Stockton v. Demuth, 7 Watts plete it according to the intention 

(Pa.), 39, 32 Am. Dec. 735; Dick v. of the parties and commercial us- 

Cooper, 24 Pa. 217, 64 Am. Dec. 652; ages," declarations made at any time 

Sidney School Furn. Co. v. Waisau, during the transaction and relating 

122 Pa. 494, 9 Am. St. Rep. 124; to it, are within the rule. Cleveland, 

Baltimore, etc., Ass'n v. Post, 122 etc., Ry. Co. v. Closser, 126 Ind. 34S, 

Pa. 579, 9 Am. St. Rep. 147; Stewart- 9 L. R. A. 754. 
son v. Watts, 8 Watts (Pa.), 392; 

1358 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1783 



the principal, by statements or admissions under the rule here in ques- 
tion, it is essential (i) That the making of statements or admissions 
of the class of those in question can fairly be regarded as incident to the 
act authorized to be done. If there was no occasion to say anything, 
or anything of the sort in question, there can be no foundation for their 
admissibility. (2) They must be made by an agent authorized to act 
with reference to the subject matter. The term authority as here used 
has the same significance which it has in reference to the agent's act or 
contract. If, therefore, the statements, representations or admissions 
offered in evidence were made by one who either had no authority at 
all, or had no authority to represent the principal at the time or the 
place or respecting the matters concerning which they were made, they 
are not admissible against the principal. 56 (3) The statements, represen- 



ts Mobile, etc., R. R. v. Ashcroft, 
48 Ala. 15; Memphis, etc., R. Co. v. 
Maples, 63 Ala. 601; Green v. Ophir, 
etc., Co., 45 Cal. 522; Central Georgia 
Ry. v. Americus Cons. Co., 133 Ga. 
392; Chicago R. R. Co. v. Riddle, 60 
111. 534; Chicago R. R. Co. v. Lee, 
60 111. 501; Rowell v. Klein, 44 Ind. 
290, 15 Am. Rep. 235; Ft. Wayne, 
etc., Traction Co. v. Crosbie, 169 Ind. 
281, 14 Ann. Cas. 117, 13 L. R. A. 
(N. S.) 1214; Mundhenk v. Central 
Iowa Ry. Co., 57 Iowa, 718; Iowa R. 
R. Land Co. v. Fehring, 126 Iowa, 1; 
Lamm v. Port Deposit, etc., Ass'n, 49 
Md. 233, 33 Am. Rep. 246; Fogg v. 
Pew, 10 Gray (Mass.), 409, 71 Am. 
Dec. 662; Stiles v. Western R. R. Co., 
8 Mete. (Mass.) 44, 41 Am. Dec. 486; 
Corbin v. Adams, 6 Gush. (Mass.) 
93; Wakefield v. South Boston R. R., 
117 Mass. 544; Robinson v. Fitch- 
burg, etc., R. R. Co., 7 Gray (Mass.), 
92; Crowley v. Boston Elevated Ry., 
204 Mass. 241; Riley v. Roach, 168 
Mich. 294, 37 L. R. A. (N. S.) 834; 
Gates v. Rifle Boom Co., 70 Mich. 
309; Van Doren v. Bailey, 48 Minn. 
305; Browning v. Henkle, 48 Minn. 
544, 31 Am. St. Rep. 591; Rodes v. 
St. Anthony Elev. Co., 49 Minn. 370, 
Bernheim v. Hahn, 65 Miss. 459; 
Williams v. Edwards, 94 Mo. 447; 
Roberts v. Wabash Ry., 153 Mo. App. 



638; Pannell v. Allen, 160 Mo. App. 
714; Wood River Bank v. Kelley, 29 
Neb. 590; Sheridan Coal Co. v. C. 
W. Hull Co., 87 Neb. 117, 138 Am. 
St. Rep. 435; Guerin v. New England 
Tel. Co., 70 N. H. 133; Meyer v. 
Virginia, etc., R. Co., 16 Nev. 341; 
Yoshimi v. U. S. Express Co., 78 N. 
J. L. 281; Anderson v. Rome, etc., 
R. R. Co., 54 N. Y. 334; New York 
University v. Loomis Laboratory, 
178 N. Y. 137; Corn v. Bergman, 145 
N. Y. App. Div. 218; People v. Ter- 
williger, 59 N. Y. Misc. 617; Cake's 
Appeal, 110 Pa. 65; Plymouth County 
Bank v. Gilman, 3 S. D. 170, 44 Am. 
St. Rep. 782; Waldrop v. Green- 
wood, etc., R. R. Co., 28 S. Car. 157; 
Missouri Pac. Ry. Co. v. Sherwood, 
84 Tex. 125, 17 L. R. A. 643; Belo v. 
Fuller, 84 Tex. 450, 31 Am. St. Rep. 
75; Gulf, etc., Ry. Co. v. York, 74 
Tex. 364; Blain v. Pacific Express 
Co., 69 Tex. 74; William Cameron 
Co. v. Blackwell, 53 Tex. Civ. App. 
414; Quanah, etc., Ry. v. Galloway 
(Tex. Civ. App.), 140 S. W. 368; 
Idaho Forwarding Co. v. Fireman's 
Fund Ins. Co., 8 Utah, 41, 17 L. R. 
A. 536; Jammison v. Chesapeake & 
Ohio Ry. Co., 92 Va. 327, 53 Am. St. 
Re]->. i3; Baltimore, etc., R. R. Co. v. 
Chiistie, 5 W. Va. 325. 

In Guerin v. New England TeL 



1783] 



THE LAW OF AGENCY 



tations or admissions must have some inherent and rational relation to 
the subject-matter of his agency. If admissible at all, it is because they 
are incident to or a part of the act which he was authorized to do. The 
mere idle, desultory or careless talk of the agent, having no legitimate 
reference to or bearing upon the business of the principal confided to 
the agent, obviously can not be binding upon the principal. (4) And the 
statements, representations or admissions must have been made by the 
agent at the time of the transaction, and either while he was actually 
engaged in the performance, or so soon after as to be in reality a part 
of the transaction. 

This last qualification is the most difficult of all. The statements are 
admissible because they are a part of the act. They must therefore be 
made before the act is completed. To express this idea, it is often said 
that they must be part of the res gestaz, which is only to repeat in Latin 
what has already been said in English. This Latin phrase would be 
well enough in itself and not objectionable if helpful, were it not for the 
fact that it is constantly confused with another meaning of the same 
expression, which has no connection with this use at all. This use de- 
pends upon the law of agency : the other, which will be explained later, 



Co., 70 N. H. 133, It Is said: "To 
make the declarations of a servant 
or agent binding upon his master 
or principal, they must be made by 
virtue of express authority, or be 
required by the due and ordinary 
prosecution of the business (Pemi- 
gewasset Bank v. Rogers, 18 N. H. 
255, 259); but 'the mere circumstance 
of their having been made of and 
concerning the business he was em- 
ployed in, does not give them any 
such effect, unless the servant had 
been instructed to make them, or 
unless they were so connected with 
the service that they became neces- 
sary in the due and effective dis- 
charge of it.' Batchelder v. Emery, 
20 N. H. 165, 167; Pemigewasset 
Bank v. Rogers, supra; Woods v. 
Banks, 14 N. H. 101, 113." 

In Standard Oil Co. v. Linol Co., 
75 N. J. L. 294, it is said: "It can- 
not be too often pointed out that 
the mere fact that one employs 
others to work for him does not 
make him chargeable with what they 



may say about him or his affairs 
while in his employ; if he employs 
them to talk for him a different case 
may be presented. King v. Atlan- 
tic City Gas Co., 70 N. J. L. 679." 

An agent authorized merely to care 
for or find a purchaser for property 
real or personal has thereby no im- 
plied authority to bind his princi- 
pal by representations or state- 
ments in disparagement or limita- 
tion of his principal's title. Camer- 
on v. Blackwell, 53 Tex. Civ. App. 
414; Pier v. Duff, 63 Pa. 59; Sweeney 
v. Sweeney, 119 Ga. 76, 100 Am. St. 
Rep. 159. 

The statements, etc., of the agent 
which are held admissible under 
the rule here being discussed must 
usually be representations, etc., of 
matters of fact, and not mere opin- 
ions, conclusions or personal judg- 
ments as to the principal's fault, 
neglect, or liability. Plymouth 
County Bank v. Gilman, 3 S. Dak. 
170, 44 Am. St. Rep. 782. 



1360 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



depends wholly upon the law of evidence. This double use makes the 
phrase a misleading and unfortunate one. 

Whatever the phrase used, however, the idea is important. If there- 
fore the statements offered in evidence were made before the perfor- 
mance was undertaken, or after it was completed, or while the agent 
was not engaged in the performance, or after his authority had expired, 
they are not admissible. 57 In such a case they amount to no more than 

- ' 

"Ricketts v. Birmingham St. Ry. Dec. 625; Gate v. Blodgett, 70 N. H. 
Co., 85 Ala. 600; Tennessee River 
Transportation Co. v. Kavanaugh, 
101 Ala. 1; Western Union Teleg. 
Co. v. West, 165 Ala. 399; Hender- 
son-Mizell Co. v. C. D. Chapman Co., 
3 Ala. App. 296; Innis v. Steamer 
Senator, 1 Cal. 459, 54 Am. Dec. 305; 
Borland v. Nevada Bank, 99 Cal. 89, 
37 Am. St. Rep. 32; Durkee v. 
Central Pac. R. Co., 69 Cal. 533, 58 
Am. Rep. 562; Anthony v. Easta- 
brook, 1 Colo. 75, 91 Am. Dec. 702; 
First Nat Bank of Canton v. North, 
6 Dak. 136; Randel v. Chesapeake & 
Del. Canal Co., 1 Harr. (Del.) 234; 
Newton v. White, 53 Ga. 395; Adams 
v. Humphreys, 54 Ga. 496; National 
Bldg. Ass'n v. Quinn, 120 Ga. 358; 
Lindblom v. Ramsey, 75 111. 246; 
National Bank v. Farmers' Bank, 
171 Ind. 323; Sweetland v. Illinois, 
etc., Telegraph Co., 27 Iowa, 433, 1 
Am. Rep. 285; May v. Sturdivant, 
75 Iowa, 116, 9 Am. St. Rep. 463; 
Phelps v. James, 86 Iowa, 398, 41 
Am. St. Rep. 497; Swift v. Redhead, 
147 Iowa, 94; Swenson v. Aultman, 
14 Kan. 273; Roberts v. Burks, Lit- 



toll's Sel. Gas. (Ky.) 411, 12 Am. 
Dec. 325; Davis v. Whitesides, 1 
Dana (Ky.), 177, 25 Am. Dec. 138; 
Southern Express Co. v. Fox, 131 
Ky. 257, 133 Am. St Rep. 241; Farm- 
ers' Bank v. Wickliffe, 134 Ky. 627; 
Louisville Times v. Lancaster, 142 
Ky. 122; Zinsmeister v. Rock Island 
Canning Co., 145 Ky. 25; Reynolds v. 
Rowley, 3 Rob. (La.) 201, 38 Am. 
Dec. 233; Haven v. Brown, 7 Greenl. 
(Me.) 421, 22 Am. Dec. 208; Burn- 
ham v. Ellis, 39 Me. 319, 63 Am. 



316; Sandford v. Handy, 23 Wend. 
(N. Y.) 260; First Nat Bank v. 
Ocean Nat. Bank, 60 N. Y. 278, 19 
Am. Rep. 181; White v. Miller, 71 
N. Y. 118, 27 Am. Rep. 13; Wadele 
v. New York Central, etc., R. Co., 95 
N. Y. 274, 47 Am. Rep. 41; Cobb v. 
United Engineering Co., 191 N. Y. 
475; Statler v. Ray Mfg. Co., 195 N. 
Y. 478; McComb v. Railroad Co., 70 
N. C. 178; Southerland v. Wilming- 
ton & W. R. Co., 106 N. C. 100; 
Rounseville v. Paulson, 19 N. D. 
466; Short v. Northern Pac. Elevator 
Co., 1 N. D. 159; Sullivan v. Oregon, 
etc., Co., 12 Ore. 392, 53 Am. Rep. 
364; Stewartson v. Watts, 8 Watts 
(Pa.), 392; American Steamship 
Co. v. Landreth, 102 Pa. 131, 48 Am. 
Rep. 196; State Bank v. Johnson, 1 
Mill. (S. Car.) 404, 12 Am. Dec. 645; 
Cobb v. Johnson, 2 Sneed (Tenn.), 
73, 62 Am. Dec. 457; North Am. Ac- 
cident Ins. Co. v. Frazer (Tex. Civ. 
App.), 112 S. W. 812; Ward v. Powell 
(Tex. Civ. App.), 127 S. W. 851; St. 
Louis, etc., Ry. v. Gilbert (Tex. Civ. 
App.), 136 S. W. 836; Fort Worth, 
etc., Ry. v. Dysart (Tex. Civ. App.), 
136 S. W. 1117; Caldwell Bros, 
v. Coast Coal Co., 58 Wash. 461; 
Hawker v. Baltimore, etc., R. 
Co., 15 W. Va. 628, 36 Am. Rep. 
825; Keeley v. Boston, etc., R. R. 
Co., 67 Me. 163, 24 Am. Rep. 19; 
Franklin Bank v. Pennsylvania, etc., 
Co., 11 Gill & John. (Md.) 28, 33 Am. 
Dec. 687; Whiteford v. Burckmyer, 
1 Gill (Md.), 127, 39 Am. Dec. 640; 
'Marshall v. Haney, 4 Md. 498, 59 
Am. Dec. 92; Lobdell v. Baker, 1 



86 



1361 



1784] 



THE LAW OF AGENCY 



[BOOK IV 



a mere narrative of a past transaction, and do not bind the principal. 
The reason is that, while the agent may be authorized to speak as well 
as act at the time and within the scope of his authority, he is not author- 
ized, at a subsequent time, after the act or transaction itself is finished, 
to narrate what he had done or how he did it. To hold otherwise 
would be to make the incident more important than the main act it- 
self. 

1784. Further limitations. It is also to be borne in 

mind that not everything which an agent knows or thinks is competent 

Mete. (Mass.) 193, 35 Am. Dec. 358; law of Agency, it is said in Red- 



Gott v. Dinsmore, 111 Mass. 45; Mc- 
Kenna v. Gould Wire Co., 197 Mass. 
406; Murphy v. Ley, 210 Mass. 371; 
Converse v. Blumrich, 14 Mich. 109, 
90 Am. Dec. 230; Baker v. Temple, 
160 Mich. 318; McDermott v. Hanni- 
bal, etc., R. Co., 73 Mo. 516, 39 Am. 
Rep. 526; Brooks v. Jameson, 55 Mo. 
505; Robinson v. Walton, 58 Mo. 
380; Adams v. Hannibal, etc., R. Co., 
74 Mo. 553, 41 Am. Rep. 333; Ryan 
v. Gilmer, 2 Mont. 517, 25 Am. Rep. 
744; Cleveland Co-op. Co. v. Hovey, 
26 Neb. 624; Union Life Ins. Co. v. 
Haman, 54 Neb. 599; Gate v. Blod- 
gett, 70 N. H. 316; Bank of U. S. v. 
Davis, 2 Hill (N. Y.), 451; North 
River Bank v. Aymar, 3 Hill (N. Y.), 
262; Thallhimer v. Brinkerhoff, 4 
Wend. (N. Y.) 394, 21 Am. Dec. 155; 
Hubbard v. Elmer, 7 Wend. (N. Y.) 
446, 22 Am. Dec. 590; Randal] v. 
Northwestern Tel. Co., 54 Wis. 140, 
41 Am. Rep. 17; Stone v. The North- 
western Sleigh Co., 70 Wis. 58f>; 
Lee v. Munroe, 7 Cranch (U. S.), 
366, 3 L. Ed. 373; Carpenter v. 
American Ins. Co., 1 Story (U. S. C. 
C.), 57; Brown v. Cranberry Iron 
Co., 18 C. C. A. 444, 72 Fed. 96; Fi- 
delity & Casualty Co. v. Haines, 49 
C. C. A. 379, 111 Fed. 337; Woolsey 
v. Haynes, 91 C. C. A. 341, 165 Fed. 
391; Bree v. Holbech, 2 Doug. 654; 
Fitzherbert v. Mather, 1 T. R. 12; 
Fairlie v. Hastings, 10 Ves. Jr. 125. 
Speaking of declarations of this 
sort, i. e., those depending on the 

1362 



mon v. Metropolitan St. Ry. Co., 185 
Mo. 1, 105 Am. St. Rep. 558: "Was 
it [the statement] admissible on the 
ground that the conductor was the 
agent and representative of the com- 
pany and made the statement by au- 
thority and to a passenger who had 
the right to demand the cause of his 
injury? This must be solved by the 
application of the law of principal 
and agent. The admission or decla- 
ration of his agent binds the princi- 
pal only when it is made during the 
continuance of the agency in regard 
to the transaction then depending. 
* * * Applying the rule just stat- 
ed, the question arises in each case, 
were the statements of the agent 
contemporary with the transaction 
and illustrative of its character, or 
merely a subsequent narrative of 
how it occurred or an explanation of 
how it might have been avoided? If 
the latter, they are inadmissible." 
[It may be suggested, however, 
that if the agent could be deemed to 
be impliedly authorized by the com- 
pany to give an answer to a pas- 



senger who had a right to demand 
the cause of his injury, such reply 
must, in the nature of the case, be 
given after the injury, and it might 
conceivably be made some time af- 
ter. Suppose, for example, that the 
injured passenger remains uncon- 
sciaus for an hour or more and then 
asks.] 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1784 



simply because he happens to declare it while engaged in the perform- 
ance of his authority. His statement must be one concerning that which 
is within his authority, it must relate to matters connected with his busi- 
ness, and it must be confined to those things concerning which he can 
be deemed authorized to speak or to act. 58 This salutary principle 
seems often to be ignored. 

The rule of admissibility should also be confined, in the case of the 
ordinary agent or servant, to such statements and declarations as are 
made as part of some authorized transaction with third persons. Mere 
reports or statements made by the agent to his principal ought not to 
be competent against the latter except to show notice to him. They 
certainly are not admissions by the principal, and the fact that they are 
made to the principal as part of the agent's duty does not show that the 
principal has consented to be bound by them to third persons. They 
are ordinarily mere hearsay. 59 This salutary principle also seems often 
to be overlooked. 



68 A statement made by a work- 
man sent to examine and repair a 
gas stove, made while at work, that 
there was something wrong with the 
stove, held not admissible against 
the gas company in an action for 
injuries from gas poisoning: "Where 
one authorizes another to speak for 
him, he may be confronted by testi- 
mony as to what his representative 
said within the scope of his au- 
thority; but where the employment 
is purely mechanical, the master is 
not bound by what his servant may 
choose to say while at work." King 
v. Atlantic City Gas, 70 N. J. L. 679. 

An agent's statements concerning 
his principal's intentions, or pur- 
poses or motives, are ordinarily not 
admissible. Walkeen Lewis Millin- 
ery Co. v. Johnston, 131 Mo. App. 
693. 

59 Reports made ~by agent to prin- 
cipal. Statements or admissions 
made in reports made by the agent 
or servant to his principal, or ma- 
terial gathered by the latter from 
the former in investigating acci- 
dents, etc., when offered not for the 
purpose of proving notice to or 
knowledge in the principal but as 



admissions of the truth of the mat- 
ters stated therein, are .generally 
held not admissible. See Carrol v. 
East Tenn., etc., Ry. Co., 82 Ga. 452, 
6 L. R. A. 214; Atchison, etc., Ry. 
Co. v. Burks, 78 Kan. 515, 18 L. R. 
A. (N. S.) 231; Wabash R. Co. v. 
Farrell, 79 111. App. 508; North Hud- 
son, etc., Ry. Co. v. May, 48 N. J. L. 
401; Powell v. Northern Pac. Ry. Co., 
46 Minn. 249. 

Contra: See Keyser v. Chicago, 
etc., R. Co., 66 Mich. 390: Virginia, 
etc., Chemical Co. v. Knight, 106 Va. 
674. 

Admissible to show notice or knowl- 
edge. Texas, etc., Ry. Co. v.' Lester, 
75 Tex. 56; Vicksburg, etc., Ry. Co. 
v. Putnam, 118 U. S. 545, 30 L. Ed. 
257. ' } 

Some courts exclude such reports 
upon the ground that they are privi- 
leged communications. Cully v. 
Northern Pacific Ry., 35 Wash. 241; 
Ex parte Schoepf, 74 Ohio St. 1, 6 
L. R. A. (N. S.) 325. But, contra, 
see Petition of Bradley, 71 N. H. 54; 
Carlton v. Western, etc., Ry., 81 Ga. 
531; Wooley v. North London Ry., L. 
R. 4 C. P. 602; Parr v. London, etc., 
Ry., 24 L. T. N. S. 558. 



1363 



17^ > 5~ 1 7^>7] THE LAW OF AGENCY [BOOK IV 



1785. - How question determined. The question whether 
a given act or fact is part of or incident to another act or fact is obvi- 
ously one which is often extremely difficult to determine. What was 
the main act, when did it begin, when did it end, must first be decided ; 
then : was this representation or statement or admission a natural and 
ordinary part of it ? The incidental verbal part of it may come at any 
stage in the whole transaction. If that transaction be the delivery of 
goods, for example, it may begin upon the agent's demand for them 
and end only with his acknowledgment of their receipt. The question, 
like other questions of implied or incidental authority, is usually a ques- 
tion of 'fact. If the whole transaction is in writing, or, if though not in 
writing, the facts are undisputed and admit of but one inference, the 
court will usually decide it: otherwise it will be for the jury. 

1786. Effect of these statements not dependent upon their be- 
ing true. It must be observed that, in all of these cases in which 
the agent is deemed to be authorized, expressly or by implication, to 
make statements, representations or admissions, the responsibility of 
the principal for them does not necessarily depend upon their being true. 
The principal may have intended that true statements only should be 
made, but the mistake or misconduct of the agent in this respect must, 
so far as innocent third persons are concerned, ordinarily affect the 
principal like any other unauthorized acts committed within the scope of 
the authority. Neither is the principal exonerated merely because he 
instructed the agent not to make them. Secret instructions have no 
greater efficacy in this field than in others. 

1787. Statements showing notice to or knowledge by the agent. 
Where the question is whether an agent had notice or knowledge of 
particular facts or conditions, conversations with or statements made by 
or to him while he was acting with reference to the subject matter of 
the notice or | knowledge and tending to show that he had the notice or 
knowledge in question, are incident to his employment and admissible. 60 
But here as elsewhere if the statement indicating notice or knowledge 

ooBundy v. Sierra Lumber Co., 88 S. Car. 47; Gulf, etc., Ry. Co. v. 

149 Cal. 772; Elledge v. National City Compton, 75 Tex. 667; Texas, etc., 

Ry. Co., 100 Cal. 282, 38 Am. St. Rep. Ry. Co. v. Lester, 75 Tex. 56; Mis- 

290; Louisville & N. R. Co. v. Bohan, souri, etc., Ry. Co. v. Russell, 40 Tex. 

116 Tenn. 271; St. Louis, etc., Ry. Co. Civ. App. 114; Soronen v. Von Pus- 

v. Weaver, 35 Kan. 412, 57 Am. Rep. tau, 112 App. Div. 437; Anderson v. 

176; Trickey v. Clark, 50 Oreg. 516; New York, etc., Co., 47 Fed. 38. 
Touchberry v. Northwestern R. Co., 

1364 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1788, 1789 

is made after the transaction is over, and after the agent's authority 
in the premises has ceased, it is inadmissible. 61 

1788. Statements of agent made to qualify or explain the act. 
Closely connected in form with the sort of statements referred to in 
the preceding section and often confused with them, though really en- 
tirely distinguishable and depending upon different considerations, are 
statements of the agent which may be material because they tend to 
qualify, modify, or explain his act. Thus it was said by a learned 
judge 62 whose words have often been quoted: "Declarations of a party 
to a transaction, though he was not under oath, if they were made at 
the time any act was done which is material as evidence in the issue be- 
fore the court, and if they were made to explain the act, or to unfold its 
nature and quality, and were of a character to have that effect, are 
treated, in the law of evidence, as verbal acts, and as such, are not hear- 
say, but may be introduced with the principal act which they accom- 
pany, and to which they relate, as original evidence, because they are 
regarded as a part of the principal act, and their introduction in evidence 
is deemed necessary to define that act and unfold its true nature and 
quality. But such declarations cannot properly be received as evidence, 
unless the principal act which they accompany and to which they relate, 
is, itself, material to the issue to be submitted to the jury, nor unless the 
declarations were made at the time the principal act was done, nor un- 
less they were of a character to explain that act, or to unfold its true na- 
ture and quality, as they are only admissible as incident to the principal 
act, and because they are a part of it, and are necessary to explain and 
define its true character." 

Statements of this sort are only admissible where the act itself is 
equivocal or ambiguous and therefore needs explanation or qualifica- 
tion ; they are admissible only where the act itself, to which the words 
are mere incidents, is material ; they must have some tendency to ex- 
plain or qualify it; and they must be made at the time of the doing of 
the act which they are thus to modify or explain. 

1789. Illustrations. Illustrations of the application of 

this rule are numerous. Thus if the question arises whether in a given 

i First National Bank v. Farm- 381, it is said: "Where the act may 

ers' Bank, 171 Ind. 323; J. I. Case have been prompted by one of two 

Plow Works v. Pulsifer, 79 Kan. 176. or more motives or objects, the dec- 

62 Mr. Justice Clifford, dissenting, larations of the actor made at the 

in Insurance Co. v. Mosley, 8 Wall. time and illustrative of the motive 

(U. S.) 397 at p. 411, 19 L. Ed. or object are admissible in evi- 

437. In Lewis v. Burns, 106 Cal. dence." 

1365 



THE LAW OF AGENCY [BOOK IV 



transaction a person acted on his own account or as agent for another ; 
whether the credit was extended to the agent personally or to his princi- 
pal, and the like, his statements made at the time showing for whom 
he purported to act would be admissible. 63 If the question were whether 
the agent had impliedly warranted his authority, or, on the other hand, 
had disclosed its nature and source to the other party so that he might 
determine for himself, statements made by the agent at the time as to 
the authority by which he purported to act would be admissible. If the 
question were as to the possibility of ratification because the agent did 
or did not purport to act as the agent of the person subsequently rati- 
fying, 64 his statements made at the time as to the person for whom he 
purported to act would be admissible. 

These holdings would not conflict with the rule that the agent's au- 
thority cannot be shown by his own statements. These statements are 
not offered for the purpose of proving authority, which must be shown 
in some other way, but only for the purpose of showing the capacity in 
which the person making them at the time purported to act. 86 



ea Lewis v. Burns, 106 Cal. 381; Al- 
len v. Duncan, 11 Pick. (Mass.) 308; 
Thomas v. Leonard, 5 111. 556; Roeb- 
ke v. Andrews, 26 Wis. 311; Jefferds 
v. Alvard, 151 Mass. 94; Bank v. 
Kennedy, 17 Wall. (84 U. S.) 19, 
21 L. Ed. 554: Simonds v. Clapp, 16 
N. H. 222; Chattanooga, etc., R. Co. 
v. Davis, 89 Ga. 708; Kentucky Stove 
Co. v. Page (Ky.), 125 S. W. 170; 
Henderson v. Coleman, 19 Wyo. 183; 
Miller-Brent Lumber Co. v. Stewart, 
166 Ala. 657. 

So statements by one in possession 
of goods as to whether he claimed 
to hold for himself or his princi- 
pal are admissible. Drum v. Harri- 
son, 83 Ala. 384. 

e* See ante, 386. 

65 Thus in Roebke v. Andrews, 
supra, where the question was as to 
the admissibility of evidence that 
certain persons in negotiating a 
purchase professed to act as agents 
of the defendant the court said: 
"Such statements by them were not 
proof of the fact of agency. It 
would be necessary to prove that 
fact in some other way, or to con- 



nect the defendant with the consum- 
mation of the bargain. But it is still 
true that whatever bargain was 
made, if any, was negotiated by 
those parties. What that bargain 
was, with whom and by whom it 
was made, could only be proved by 
showing what was done and said In 
its actual negotiation. If they pro- 
fessed to act for the defendant, that 
fact entered into and formed apart 
of the negotiation itself, and gave it 
character. It was a part of the res 
gestae and was admissible as such, 
though without something further 
it would have no binding effect upon 
the defendant." So in Thomas v. 
Leonard, supra, where the question 
was as to the admissibility of state- 
ments of defendant's daughters as 
to the person on whose account they 
bought certain goods the court said: 
"The question, 'what did the daugh- 
ters say, when they purchased said 
goods?' was clearly a part of the res- 
gestae, and competent to show what 
took place when the goods were 
purchased. This evidence was not 
offered to prove that the defendant 



1366 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1790 

Such declarations are, moreover, admissible not only against the prin- 
cipal but for him, as where, for example, the principal desires to show 
that, in the transaction in question, the alleged agent purported to act 
on his own personal account, or that he purported to act as his agent ; 
though ordinarily the mere self-serving declarations of the agent are 
not admissible in his principal's behalf. 66 

1790. Statements indicative of the agent's state of mind. 
Wherever the agent's state of mind at a particular time is material 
where the question of his good faith, his alertness, his sense of duty OP 
responsibility, his attention to duty, his motive, his appreciation of dan- 
ger, and the like, is involved his statements, admissions or declarations 
made at the time and indicating what his state of mind then was in ref- 
erence to such matters, would be admissible in evidence either for or 
against his principal wherever the principal would be affected by the 
agent's state of mind, and it would be a proper subject of inquiry. This 
is not upon any ground of agency, of course, but upon the ordinary 
rules of evidence. 

Thus if the issue were an agent's negligence, evidence of his declara- 
tions at the' time tending to show that his thoughts and attention were 
upon something else than his duty would be admissible ; 67 if the charge 
were his recklessness, declarations showing his indifference to conse- 
quences would be admissible ; 68 if the question was as to his malice, 

was liable to pay for the goods. Canning Co., 145 Ky. 25; Insurance 

That depended nron the onr-sfion Co. v. Guardiola, 129 U. S. 642, 32 L. 

whether the daughters of the de- Ed. 802; Chicago v. McKechney, 205 

fendant were to be considered as 111. 372; Royle Mining Co. v. Fidelity 

the agents of the defendant in mak- Co., 161 Mo. App. 185. 

ing the purchase of the goods. If Where two persons jointly em- 

the answer had been, that thsy di- ploy the same agent one of them can- 

rected that the goods should be not charge the other upon admis- 

charged to some third person, this sions made by the common agent. 

would have afforded a strong pre- Austin v. Rupe, Tex. Civ. App. 

sumption that they were not acting , 141 S. W. 547. 

as the agents of their father. This <" See Knittel v. United Ry. Co., 

testimony was therefore admissible 147 Mo. App. 677; Reddick v. Young, 

to go to the jury; but whether it was I n d. , 98 N. E. 813. 

sufficient to authorize a recovery, 68 See, for example, Nashville, etc., 

without other proof, is entirely a R- Co. v. Messino, 1 Sneed (Tenn.), 

diiferent question, and one which 220; Wabash W. Ry. Co. v. Brow, 13 

this court is not called upon to de- C. C. A. 222, 65 Fed. 941. 

termine." Statements showing haste, where 

oe Self-serving statements of agents that may have affected the result, 

not admissible in principal's be- would be admissible. Gulf, etc., Ry. 

half. Zinsmeister v. Rock Island Co. v. Compton, 75 Tex. 667; but not 



179^. 1 79 2 ] THE LAW OF AGENCY [BOOK IV 

declarations showing his dislike or hatred would be admissible; 89 and 
the like. 

Such evidence might be admissible for the principal as well as against 
him. Thus if a master were defending against liability for a servant's 
act, evidence of the servant's declarations at the time showing that the 
act was the result of the servant's own, private desire for revenge 
against an enemy rather than an act done for the master, would be com- 
petent. 

1791. Words themselves constituting or aggravating the wrong. 
The principal may be liable, in many cases, on the ordinary princi- 
ples of agency for words which in themselves constitute a wrong or 
which aggravate a wrong. Thus the principal may be liable for a libel 
published, or a slander uttered, by his agent or servant. A carrier of 
passengers, owing a duty to protect them, may be liable for the verbal 
abuse or attack upon them by his servant to whom he has confided the 
duty of protecting them. 70 

In many cases, too, an independent wrong may be aggravated by the 
contumelious, abusive or derisive language of the servant or agent who 
perpetrates the wrong. 

In these cases liability does not depend upon whether the principal 
can be thought to have authorized the words : he may expressly have for- 
bidden them and still be liable because they were uttered while the agent 
or servant was acting within the scope of his authority and about his 
master's business. 

1792. Admissions of agent generally not competent to charge 
principal. The admissions of an agent, except in the cases already 
referred to, 71 in which it can be said that he has been expressly or im- 
pliedly authorized to make them, are generally not competent to charge 
his principal. 72 The agent may make admissions which will charge 

otherwise: Gardner v. Detroit St. Ry. bins v. Little Rock, etc., R. Co., 19 
Co., 99 Mich. 182; statements show- Ark. 85, 9 Ann. Gas. 84. 
ing anger: Cincinnati, etc., Ry. Co. 09 i n an action for malicious prose- 
v. Evans, 129 Ky. 152. cution, the statement of the agent 
But if the motive Is one which who Instituted the prosecution, show- 
would not affect the principal, either ing his motive, are admissible. 
at all or under the pleadings or al- Southern Car Co. v. Adams, 131 Ala. 
legations, statements of the agent 147. 

showing his animus would not be 7 Malecek v. Tower Grove Ry. Co., 

admissible. Gulf, etc., Ry. Co. v. 57 Mo. 17. 

York, 74 Tex. 364; Dilllngham v. TI See ante, 1777-1781, et seq. 

Russell, 73 Tex. 47, 15 Am. St. Rep. Fairlie v. Hastings, 10 Ves. Jr. 

753, 3 L. R. A. 634; Butler v. Man- 127; Roberts v. Burks, Littell's Sel. 

hattan R. Co., 143 N. Y. 417. 42 Am. Cas. (Ky.) 411, 12 Am. Dec. 325, 

St Rep. 738, 20 L. R. A. 40; Dob- Clancy v. Barker, 71 Neb. 83, 115 

1368 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/93 

himself, and the principal may make admissions to bind himself, but 
usually one man can not admit things to charge another. An agent may 
confess his own negligence or default so far as his own liability is con- 
cerned, but he can not ordinarily be deemed authorised to confess his 
principal's negligence or defaults. So far as the principal' is concerned, 
if he does not care to admit matters affecting his liability or interests, 
he is entitled to have the question tried by the regular and established 
methods of determining liability. Unless he has authorized him to do 
so, the principal certainly cannot have his liability fixed by the admis- 
sions of a person who happens, for other purposes, to be his agent. As 
stated long ago in the leading case 78 upon the subject, "The admission 
of an agent cannot be assimilated to the admission of the principal. A 
party is bound by his own admission, and is not permitted to contradict 
it. But it is impossible to say, a man is precluded from questioning or 
contradicting anything any person has asserted as to him, as to his 
conduct or his agreement, merely because that person has been an 
agent of his. If any fact, material to the interest of either party, rests 
in the knowledge of an agent, it is to be proved by his testimony, not 
by his mere assertion." 

The fact that it is the negligence of the agent which is sought to be 
proved against the principal does not make the agent's admission of his 
own negligence competent against his principal. It is bad enough, in 
many cases, for the principal to be liable for the negligence of his agent, 
without also fastening his liability by the agent's admission. 

The fact that principal and agent are sued together does not affect 
the rule as to the principal, though the agent's admission might be used 
to charge the agent. 

1793. Declarations and admissions of agent as part of res ges- 
tae Spontaneous utterances. Although they thus can not be re- 
garded as authorized, the declarations and admissions of an agent may 
often be put in evidence upon an entirely different ground, namely, 
that they constitute part of what is called the "res gesta." Some refer- 
ence to one use of this term has already been made. 74 That use de- 
Am. St. Rep. 559, 8 Ann. Gas. 682, 69 122 Pa. 449; Jungworth v. Chicago, 
L. R. A. 642; Norfolk, etc., R. Co. v. etc., R. Co., 24 S. D. 342; People v. 
Suffolk Lumber Co., 92 Va. 413; Jam- Terwilliger, 59 N. Y. Misc. 617; 
mison v. Chesapeake, etc., R. Co., 92 Guerin v. New England Tel. Co., 70 
Va. 327, 53 Am. St. Rep. 813; Willis N. H. 133; and many other cases 
v. Atlantic, etc., R. Co., 120 N. Car. cited in the following sections. 
508; McDermott v. Hannibal, etc., 73 Fairlie v. Hastings, supra. 
R. Co., 73 Mo. 516, 39 Am. Rep. 526; 74 See ante, 1781. 

Oil City Fuel Supply Co. v. Boundy, 

1369 



1794] THE LAW OF AGENCY [COOK iv 

pends, as has been pointed out, upon the law of agency, upon the fact 
that the person who made the declaration in question was in some way 
expressly or impliedly authorised to speak for his principal because 
what he said was part of what he was authorized to do. The use here 
contemplated is a different one though the two are constantly confused. 
It does not necessarily depend upon the law of agency at all. 78 It is a 
rule of evidence, and is just as applicable in a proper case to one who 
was not an agent at all as to one who was an agent. Ordinarily one 
who is to be affected by the statements of a person, whom he has not 
authorized to speak for him, has a right to be confronted by the witness, 
to have him put under oath, and to subject him to cross-examination. 
The purpose of this is, of course, to make sure that he is telling the 
truth. Exceptions to this rule have been admitted in various cases upon 
the ground that there were some other peculiar circumstances present, 
conducive to truth telling, which might serve as a substitute for the or- 
dinary tests. A familiar illustration is the case of the so called "dying 
declaration." Another illustration is found in the case before us. It 
is that where some unusual and striking event has occurred, for ex- 
ample, a railway accident or similar casualty, and a person, who has 
participated in it, makes a statement concerning it either during it or 
soon after it, while yet under the excitement and influence of it and be- 
fore he has had time to consider the effects and consequences of what 
he says, there is such likelihood that what he thus says will be true as 
to dispense with the ordinary tests for assuring truthful utterance. 
The theory is that the spontaneous utterances of one who speaks under 
the excitement of the moment and before he has had time to deliberate 
to concoct a self favoring story are likely to be true. 76 

1794. Meaning of res gestae as here used. By reason 

of the fact that the declarations here in question must concern some 
main act, for example the accident, and must be made by one who was 
present and affected by its influence and must be made while under that 
influence, it has been said that the declaration must be a part of the 
act a part of the res gesta. This use of the Latin phrase is to be de- 

" See Hupfer v. National Distilling made the declaration while he was 

Co., 119 Wis. 417. surrounded by an angry mob which 

fIn Feldman v. Detroit United threatened him with personal vio- 

Ry., 162 Mich. 486, the declarations lence. 

were thought not to be spontaneous For the similarity, in principle, to 

and were excluded because the dec- dying declarations, see Riggs v. 

larant, the motorman of a car which Northern Pac. R. Co., 60 Wash.\292. 
had struck and killed a child, had 

1370 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1795 

plored because it means no more than the English equivalent, is likely 
to be confused with the other use of the same phrase, and particularly 
because it is likely to be made the cover for loose thinking or careless 
discrimination. It seems, however, to be firmly fixed in our legal 
phraseology. This use, as stated above, is not confined to agents, or 
to cases involving civil liability. The statements of any person present 
may sometimes be admissible and may be used in criminal and other 
cases as well as those involving a principal's or master's liability. In 
the latter cases, however, which are the ones here being considered, it 
is almost invariably an agent's or a servant's statement which is in- 
volved, and the real if not the avowed purpose is to get the statement 
into the case as an admission of the agent or servant which will bind 
the principal. 77 There are doubtless cases wherein the statement of- 
fered might be sustained under either use of the phrase res gcstce; and 
there are many cases wherein statements admissible for some other rea- 
son are erroneously justified under the loose assertion that "they were 
part of the res gcsta." The result is that the rule of res gesta in the 
law of agency is in an unsatisfactory condition. 

1795. What sort of statements admissible. This being 

the theory upon which such evidence is admissible, a number of limita- 
tions at once suggest themselves. The person whose words are offered 
must have been a participant in the transaction and thus have come 
within its influence. 78 The statements offered must be relevant to the 

" See Louisville, etc., Ry. Co. v. knew its cause which is the natural 

Johnson, 131 Ky. 277, 20 L. R. A. (N. inference from his statement, if tru- 

S.) 133. ly reported yet it is clear that 

78 in Metropolitan R. Co. v. Collins, what he said, though near in point 
1 App. Cas. D. C. 383, where the sub- of time, was narrative only of a past 
ject matter of the inquiry was the transaction. It was not a spontane- 
alleged sudden starting of a street ous outburst, incident to the occur- 
car, statements made two to five rence or illustrative of it." [This 
minutes later by the transfer-agent statement, however, should have 
of the company to the effect that been inadmissible on another 
the conductor "would get into ground; it was merely the witness's 
trouble" were excluded. Said the conclusion or deduction as to what 
court: "If the declarations offered would happen and not in any way a 
had been made by the conductor of statement of fact.] 
the car whose negligence, according What is said by by-standers after 
to the plaintiff, caused the injury, the event as to the cause of it is 
the error would not be so clear; not admissible. Detroit, etc., R. Co. 
but the transfer agent was not an v. Van Steinburg, 17 Mich. 99; Lea- 
actor in the occurrence and had hey v. Cass Ave. Ry. Co., 97 Mo. 165, 
nothing to do with it. If it be con- 10 Am. St. Rep. 300; Missouri Pac. 
ceded that he saw the accident and Ry. Co. v. Ivy, 71 Tex. 409, 10 Am. 

1371 



I795J 



THE LAW OF AGENCY 



[BOOK iv 



transaction and such as would be provable if the person making them 
was put upon the stand as a witness. Mere conclusions, opinions and 
speculations of the declarant should therefore be excluded. 70 The 
statement offered must relate to the transaction in question and not be 
merely narrations, though made at the time of that transaction or soon 
afterward, of other and previous facts, conditions, or events. 80 It 



St. Rep. 758, 1 L. R. A. 500: Louis- 
ville Ry. Co. v. Johnson, 131 Ky. 277, 
20 L. R. A. (N. S.) 133. Statements, 
though by a participant, as to what 
other persons thought of the trans- 
action, are not admissible. Boone 
v. Oakland Transit Co., 139 Cal. 490. 
Where the question was as to the 
negligence of certain servants of a 
railroad company, to wit, the bag- 
gagemen, in leaving a baggage 
truck in a passage way, declarations 
of the telegraph operator, though 
proximate in point of time, are not 
admissible. He was not "an actor 
or participant in that transaction." 
Tiborsky v. Chicago, etc., Ry. Co., 
124 Wis. 243. Statements made 
among themselves by the trainmen 
of one train as to the speed of another 
train which caused the injury but with 
which they were in no way connect- 
ed are inadmissible. Norfolk, etc., 
Ry. Co. v. Gesswine, 75 C. C. A. 214, 
144 Fed. 56. Statements made by a 
foreman, who did not see the act, 
as to how it happened, are not ad- 
missible. St. Louis, etc., Ry. Co. v. 
Brisco, 42 Tex. Civ. App. 321. "Not 
res gestae but purely hearsay," said 
the court. 

Thus in a great variety of cases 
expressions of opinion as to whose 
fault it was, who was to blame, 
how it must have happened, what 
would have been the case if some- 
thing else had happened or been 
done, and the like, though made at 
or near the time, have been held 
inadmissible, as mere "conclusions," 
"judgments pronounced after the 
event," "narratives of past events," 
and the like. See Scott v. St Louis, 



etc., R. Co., 112 Iowa, 54; Giberson 
v. Patterson Mills, 174 Pa. 369, 52 
Am. St. Rep. 823; Silveira v. Iverson, 
128 Cal. 187; Plymouth County Bank 
v. Oilman, 3 S. D. 170, 44 Am. St. 
Rep. 782; Metropolitan Nat Bank 
v. Commercial State Bank, 104 Iowa, 
682; St. Louis, etc., Ry. Co. v. Barg- 
er, 52 Ark. 78; Balding v. Andrews, 
12 N. Dak. 267; Electric Ry. Co. v. 
Carson, 98 Ga. 652; Ohio, etc., Ry. 
Co. v. Stein, 133 Ind. 243, 19 L. R. 
A. 733 (such a statement might, how- 
ever, be admissible for the purpose 
of showing knowledge of the defect- 
ive condition. Young v. Seaboard 
Airline Ry. Co., 75 S. Car. 190); 
Adams v. Hannibal, etc., R. Co., 74 
Mo. 553, 41 Am. Rep. 333; Nelson v. 
Georgia, etc., Ry. Co., 68 S. Car. 462; 
Ruschenberg v. Southern, Elec. R. 
Co., 161 Mo. 70; Redmon v. Metro- 
politan St. Ry. Co., 185 Mo. 1, 105 
Am. St. Rep. 558; Dodge v. Childs, 
38 Kan. 526; Ft. Wayne, etc., Trac- 
tion Co. v. Crosbie, 169 Ind. 281, 14 
Ann. Gas. 117, 13 L. R. A. (N. S.) 
1214; Louisville, etc., R. Co. v. Webb, 
99 Ky. 332; Louisville, etc., R. Co. v. 
Ellis, 97 Ky. 330. 

so Thus on the ground that it was 
merely a narration of a past trans- 
action, the statement of a street car 
driver made soon after an accident 
that he had previously reported the 
car as having a bad brake, was held 
not admissible. Wormsdorf v. De- 
troit City Ry. Co., 75 Mich. 472. 13 
Am. St. Rep. 453. So in an action for 
killing stock evidence of statements 
made afterwards by the section fore- 
man as to the previous condition of 
the fence, were held inadmissible. 



1372 



CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1796 

seems scarcely necessary to decide that the statements offered must be 
serious and not jocular. 81 

And, finally, and above all, as will be more fully seen in the following 
sections, the statements must be made under the excitement of the 
event, they must be "the language of exclamation or surprise" and 
not "the language of narrative with a full appreciation of the conse- 
quences growing out of a transaction which is passed and complete." 82 
As stated in another case, the statements admissible must be the "events 
speaking for themselves through the instinctive words and acts of par- 
ticipants, not the words and acts of participants when narrating the 
events." 83 

1796. What embraced within res gestae. The question 

of what declarations and admissions constitute a part of the res gesta, 
within this rule is one exceedingly difficult of determination, and upon 
which the authorities are conflicting. It was formerly held, and the 
doctrine still prevails in some jurisdictions, that the declarations and ad- 
missions must be strictly contemporaneous with the act ; that if they 
were not made until the act in controversy was completed, although 
made immediately afterwards, and on the spot, they were not admissi- 
ble. 84 This would undoubtedly be sound wherever their admissibility 
depends upon the rules of Agency, if they must be authorized, they 
must then constitute a part of the authorized act in order to be them- 
selves authorized. 

Where, however, the true ground for the admission of the declara- 
tions is that they are made spontaneously and under the influence of 
the main event, it is then possible that the influence may continue al- 
though the act is ended, and the proper view should be to treat the mere 
point of time as less material, and to look rather to the nature of the 

Norman v. Chicago, etc., Ry. Co., 110 drews, 12 N. D. 267; Fredenthal v. 

Iowa, 283. "It was but a narrative Brown, 52 Ore. 33; Johnson v. Mc- 

of a past transaction," said the court, Lain Investment Co., 79 Kan. 423. 

citing Treadway v. Railroad Co., 40 131 Am. St. Rep. 302. 

Iowa, 526. 83 St. Louis, etc., Ry. Co. v. Kelley, 

si In Holmes v. Washington Real 61 Ark. 52, quoting Wharton's Crim. 

Estate Co., 20 R. I. 289, it was ex- Ev. 262. 

pressly decided that statements evi- ^ See, for example, Adams v. Han- 

dently made jocularly and so under- nibal, etc., R. Co., 74 Mo. 553, 41 Am. 

stood by the hearers were not com- Rep. 333; Barker v. St. Louis, etc., 

petent as part of the res gestae. Ry. 'Co., 126 Mo. 143, 47 Am. St. Rep. 

82Weinkle v. Brunswick, etc., R. 646, 26 L. R. A. 843; Ruschenberg v. 

Co., 107 Ga. 367. See also, Citizens' Southern Elec. R. Co., 161 Mo. 70; 

St. R. Co. v. Howard, 102 Tenn. 474; Koenig v. Union Depot Ry. Co., 173 

Ohio, etc., Ry. Co. v. Stein, 133 Ind. Mo. 698; Redmon v. Metropolitan St. 

243, 19 L. R. A. 733; Balding v. An- Ry. Co., 185 Mo. 1, 105 Am. St. Rep. 

1373 



i?97] 



THE LAW OF AGENCY 



[BOOK iv 



statements and the circumstances under which they were made. Ac- 
cording to this view, each transaction should be judged by its own pe- 
culiar facts, without conclusive regard to a fixed interval of time, and 
with more regard to the question whether the declarations or admissions 
seem to have been made, not with deliberate consideration, but voltyi- 
tarily and spontaneously, under the immediate influence of the princi- 
pal transaction, and are so connected with it as to characterize or ex- 
plain it. 88 

All the cases, however, agree that if the admissions were made so 
long after the event that they cannot be deemed to come within its in- 
fluence, they are mere narrations of a past event, and are not competent 
as evidence. 

Most of the cases present the question of statements made after the 
act ; but there is no reason why statements made before, if made under 
its impending influence, should not be admissible. 88 

1797. How admissibility determined. The subject here 

considered being a matter of evidence, the question of the admissibility 
of the declarations must, like the question of the admissibility of evi- 
dence generally, be determined by the court. It has sometimes been 
said that the admissibility of these declarations rests in the discretion 
of the court ; but that can not be deemed to be true without qualifica- 
tion. The trial court must of course determine whether the circum- 
stances are such as to make the declarations admissible, as it must in 



558; Cleveland, etc., R. Co. v. Mara, 
26 Ohio St. 185; Tennis v. Consol. 
Rap. Transit Co., 45 Kan. 503; Dodge 
v. Childs, 38 Kan. 526; Balding v. 
Andrews, 12 N. D. 267. 

ss See People v. Vernon, 35 Cal. 49, 
95 Am. Dec. 50; Keyser v. Chicago 
& G. T. Ry. Co., 66 Mich. 390, [citing 
Scaggs v. State, 8 Sm. & Mar. (Miss.) 
722; Insurance Co. v. Mosley, 8 Wall. 
(U. S.) 397, 19 L. Ed. 437; Common- 
wealth v. McPike, 3 Gush. (Mass.) 
181, 50 Am. Dec. 727; Harriman v. 
Stowe, 57 Mo. 93; Crookham v. State, 
5 W. Va. 51"0; Boothe v. State, 4 Tex. 
App. 202; Regina v. Abraham, 2 
Car. & K. 550; Hanover R. Co. v. 
Coyle, 55 Penn. St. 402; Brownell v. 
Pacific R. Co., 47 Mo. 239; People v. 
Vernon, 35 Cal. 49, 95 Am. Dec. 50; 
Handy v. Johnson, 5 Md. 450; Carter 
v. Buchannon, 3 Ga. 513; Mitchum 
v. State, 11 Ga. 615; Courtney v. 



Baker, 2 Jones & Sp. (N. Y.) 529; 
O'Connor v. Chicago, etc., .Ry. Co., 
27 Minn. 166, 38 Am. Rep. 288; Ar- 
mil v. Chicago, etc., R. R. Co., 70 
Iowa, 130; State v. Koran, 32 Minn. 
394, 50 Am. Rep. 583; Lund v. 
Tyngsborough, 9 Cush. (Mass.) 36, 
59 Am. Dec. 159]. 

See also, Walters v. Spokane 
Intern. Ry. Co., 58 Wash. 293; 
State v. McDaniel, 68 S. Car. 304, 
102 Am. St. Rep. 661 (a criminal 
case) ; McMahon v. Chicago City Ry. 
Co., 239 111. 334; Denver City Ry. 
Co. v. Brumley, 51 Colo. 251; An- 
derson v. Great Northern Ry. Co., 
15 Idaho, 513; American Mfg. Co. v. 
Bigelow, 110 C. C. A. 77, 188 Fed. 34; 
Champlin v. Pawcatuck Val. St. Ry. 
Co., 33 R. I. 572. 

se See Northern Tex. Trac. Co. v. 
Caldwell, 44 Tex. Civ. App. 374. 



1374 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1 79$ 

the case of dying declarations, confessions, and the like ; and courts of 
review are quite reluctant to overthrow the conclusion of the trial 
judge; but the matter is, nevertheless, controlled by legal rules and is 
not a matter of mere discretion. 87 

The admissibility of these declarations does not depend, as seems 
sometimes to be thought, upon the question whether the declarant is 
dead or otherwise unable to testify. 

1798. Illustrations of what has been called part of the res ges- 
tae Inadmissible declarations. Attempts to give illustrations of 
the actual rulings under a so-called res gestcs theory are unsatisfactory, 
because the cases have sometimes gone upon one theory and sometimes 
upon another. The following have been selected chiefly with reference 
to the element of time involved, though it is obvious that there must be 
much in each case besides the mere question of the time which has 
elapsed. 

In an action to recover damages caused by the derailment of a train, 
statements of the engineer who was in charge of the engine at the time 
of the accident, made six months or more afterwards, were held to be 
too remote to constitute a part of the res gesta; 88 so an admission by 
the general agent of a telegraph company of its liability for an accident, 
alleged to have been caused by its negligence, two months after the ac- 
cident, has been held to be not admissible ; 89 so in an action against a 
railway company to recover damages for the misconduct of a conduc- 
tor, statements made by the conductor about three weeks later to the 
affect that he had been drinking on the day in question, were held in- 
admissible ; 90 so evidence of the statement of a railroad roadmaster that 
a certain employee, through whose incompetence an accident had hap- 
pened, was incompetent, made several days after the accident, has been 
held to be inadmissible ; 81 so the admissions made by the engineer of an 
engine which had killed some cattle, made while he was still on the en- 

ST See Pledger v. Chicago, etc., R. made more than a year afterward 

Co., 69 Neb. 456; Walters v. Spokane were held inadmissible. 

Intern. Ry. Co., 58 Wash. 293; Shel- 9 Randall v. Northwestern Tel. Co., 

ton v. Southern Ry., 86 S. Car. 98. 54 Wis. 140, 41 Am. Rep. 17. 

ss Colorado Midland Ry. Co. v. o Louisville, etc., Ry. Co. v. Wil- 

McGarry, 41 Colo. 398. In Gardner liamson (Ky.), 96 S. W. 1130; Radel 

v. Schenectady Ry. Co., 113 N. Y. Co. v. Borches, 147 Ky. 506, 39 L. R. 

App. Div. 133, the statement held A. (N. S.) 227. 

inadmissible was made four years i McDermott v. Hannibal, etc., R. 

before. Co., 73 Mo. 516, 39 Am. Rep. 526. 

In Simms v. Forbes, 86 Miss. Statements were held inadmissible 
412, statements of an agent that when made: "a few days" after- 
he blamed himself for the accident wards (Robinson v. Fitchburg, etc., 

1375 



1798] 



THE LAW OF AGENCY 



[BOOK iv 



gine where it had been thrown from the track by the accident, but made 
an hour after the accident, were held to be incompetent. 92 Upon such 
cases as those just mentioned there would probably not be much dispute 
under any theory. As the time grows shorter, the conflict becomes 
greater. In an action against a railroad company for personal injuries 
sustained by a passenger, evidence of the declarations of the conductor 
and engineer "a few minutes" after the accident, was held incompe- 
tent ; 03 so in two like cases evidence of similar declarations made, in one 

.-)?/,- .anoii- 
R. R. Co., 7 Gray (Mass.), 92); two Co. (Ky.), 92 S. W. 571; three quar- 



and a half days afterward (Packet 
Co. v. Clough, 20 Wall. (U. S.) 528, 
22 L. Ed. 406); four or five days af- 
ter (Paraffine Oil Co. v. Berry (Tex. 
Civ. App.), 93 S. W. 1089); several 
days after (Western Union Teleg. 
Co. v. Jackson, 95 Miss. 471); the 
day after (Harris v. Carstens Pack- 
ing Co., 43 Wash. 647, 39 L. R. A. 
491; Clancy v. Barker, 71 Neb. 83, 
115 Am. St. Rep. 559, 69 L. R. A. 
642, 8 Ann. Cas. 682; Maltby v. R. 
R. Kirkland, 48 Fed. 760; Cook v. 
Stimson Mill Co., 36 Wash. 36; Rapp 
v. Easton Transit Co. (N. J.), 72 
Atl. 38; Jefferson Fertilizer Co. v. 
Houston, 3 Ala. App. 348); the next 
morning (Wynnewood v. Cox, 31 
Okla. 563; Havens v. Suburban Ry. 
Co., 26 R. I. 48, 3 Ann. Gas. 617; 
Caldwell v. Nichol, 97 Ark. 420); 
the next night (Layzell v. Coal Co., 
156 Mich. 268). 

82 Hawker v. Baltimore, etc., R. 
Co., 15 W. Va. 628, 36 Am. Rep. 825. 
So statements were held inadmis- 
sible when made: ten hours after the 
accident, Kyner v. Portland Mining 
Co., 106 C. C. A. 245, 184 Fed. 43; 
two hours after, Dodge v. Childs, 38 
Kan. 526; an hour or two after, 
Missouri Pac. Ry. Co. v. Ivy, 71 Tex. 
409, 10 Am. St. Rep. 758, 1 L. R. A. 
500; an hour after, Norfolk & C. R. 
Co. v. Suffolk Lumber Co., 92 Va. 
413: H. & St. L. R. Co. v. Davis 
(Ky.), 106 S. W. 304; Cincinnati, 
etc., Ry. v. Martin, 146 Ky. 260; 
Balding v. Andrews, 12 N. D. 267; 
half an hour to an hour after, Mar- 
tin v. South Covington & C. St. Ry. 



ters of an hour after, Henry v. 
Seattle Elec. Co., 55 Wash. 444; half 
an hour after, International, etc., R, 
Co. v. Munn, 46 Tex. Civ. App. 276. 

So in a number of cases in which 
the time is not precisely stated but 
was evidently a considerable time. 
Louisville & N. R. Co. v. Ellis' Adm., 
97 Ky. 330; The Maurice, 135 Fed. 
516; Moseley's Adm'r v. Black Dia- 
mond Coal Co. (Ky.), 109 S. W. 306; 
Gould v. Aurora, etc., Ry., 141 111. 
App. 344. 

3 Alabama, etc., R. R. Co. v. Hawk, 
72 Ala. 112, 47 Am. Rep. 403. In this 
case the court lay down the rule that 
"Perfect coincidence of time between 
the declaration and the main fact is 
not of course required. It is enough 
that the two are substantially con- 
temporaneous;" but reach the con- 
clusion "that the declarations of the 
conductor and engineer cannot, un- 
der a proper application of this prin- 
ciple, be regarded as a part of the 
res gcstae of the accident resulting 
in 'injury to the plaintiff. The time 
'a few minutes' does not appear 
to be so proximate to the main trans- 
action, nor are the declarations made 
otherwise so closely connected with 
it, as an elucidating circumstance, as 
justly to authorize the conclusion 
that they are not merely narrative 
of a past occurrence, which at the 
moment was finished and complete." 
Eight minutes later, too late. Baker 
v. St Louis, etc., R. Co., 126 Mo. 143, 
29 L. R. A. 843. So of a statement by 
an engineer "some minutes" after an 
accident. Davis v. Louisville H. & 



CHAP. Vj 



LIABILITY OF PRINCIPAL TO THIRD PARTIES 



case, 94 ten to thirty minutes, and in the other, 88 five minutes, after the 
accident, was held inadmissible; so in an action for injuries sustained 
by a passenger from the overturning of a stage sleigh, the declarations 



St. L. Ry. Co. (Ky.), 97 S. W. 1122. 
So a statement made two or three 
minutes after. Morse v. Consolidated 
Ry. Co., 81 Conn. 395; or one made 
"a few seconds" after, Brauer v. New 
York, etc., Ry. Co., 131 App. Div. 682. 
See also, St Louis, etc., Ry. Co. v. 
Pope, 100 Ark. 269; Blue Ridge Light 
Co. v. Price, 108 Va. 652. 

*Vicksburg, etc., R. R. v. O'Brien, 
119 U. S. 99, 30 L. Ed. 290. "It was," 
said the court, "in its essence, the 
mere narration of a past occurrence, 
not a part of the res gestae simply 
an assertion or representation, in the 
course of conversation, as to a matter 
not then pending, and in respect to 
which his authority as engineer had 
been fully exerted. It is not to be 
deemed part of the res gestae simply 
because of the brief period interven- 
ing between the accident and the 
making of the declaration. The fact 
remains that the occurrence had 
ended when the declaration in ques- 
tion was made, and the engineer was 
not in the act of doing anything that 
could possibly affect it. If his decla- 
ration had been made the next day 
after the accident, it would scarcely 
be claimed that it was admissible 
evidence against the company. And 
yet the circumstance that it was 
made between ten and thirty min- 
utes, an appreciable period of time 
after the accident, cannot, upon 
principle, make this case an excep- 
tion to the general rule. If the con- 
trary view should be maintained, it 
would follow that the declarations of 
the engineer if favorable to the com- 
pany, would have been admissible in 
its behalf as part of the res gestae 
without calling him as a witness, 
a proposition that will find no sup- 
port in the law of evidence. The 
cases have gone far enough in the 
admission of the subsequent decla- 
rations of agents as evidence against 

87 1377 



their principals. These views are 
fully sustained by adjudications in 
the highest courts of the States," 
[citing Luby v. Hudson River R. R., 
17 N. Y. 131; Pennsylvania R. R. Co. 
v. Books, 57 Penn. 339, 98 Am. Dec. 
229; Dietrich v. Baltimore, etc., R. 
R., 58 Md. 347; Lane v. Bryant, 9 
Gray (Mass.), 245, 69 Am. Dec. 282; 
Chicago, etc., R. R. Co. v. Riddle, 60 
111. 534; Virginia, etc., R. R. Co. v. 
Sayers, 26 Gratt. (Va.) 328; Chicago, 
etc., Ry. Co. v. Fillmore, 57 111. 265; 
Michigan Cent. R. R. Co. v. Cole- 
man, 28 Mich. 440; Mobile, etc., R. R. 
Co. v. Ashcraft, 48 Ala. 15; Belief on- 
taine Ry. Co. v. Hunter, 33 Ind. 335, 

5 Am. Rep. 201; Adams v. Hannibal, 
etc., R. R. Co., 74 Mo. 553, 41 Am. 
Rep. 333; Kansas, etc., R. R. Co. v. 
Pointer, 9 Kan. 620; Roberts v. 
Burks, Litt. (Ky.) Sel. Cas. 411, 12 
Am. Dec. 325; Hawker Y. Baltimore 

6 Ohio R. R. Co., 15 W. Va. 628, 36 
Am. Rep. 825]; Waite, C. J., and 
Field, Miller and Blatchford, J. J., 
dissented. So a conductor's state- 
ment that the accident was caused 
by his negligence, made over ten 
minutes after an accident, was held 
inadmissible. Chesapeake & Ohio Ry. 
Co. v. Reeves (Ky.), 11 S. W. 464; 
so a statement fifteen minutes after, 
Citizens' St. Ry. Co. v. Howard, 102 
Tenn. 474; so a conductor's statement 
eight to ten minutes after, Barker v. 
St. Louis, etc., Ry. Co., 126 Mo. 143, 
47 Am. St. Rep. 646, 26 L. R. A. 843. 

SB Durkee v. Central Pacific R. R. 
Co., 69 Cal. 533, 58 Am. Rep. 562. So 
a statement by a motorman "seven 
or eight minutes" after the collision 
was held incompetent. Kimic v. San 
Jose-Los Gatos Ry., 156 Cal. 379. Also, 
Chicago Union Traction. Co. v. Daly, 
129 111. App. 519; and Tennis v. Con- 
solidated Rapid Transit Ry. Co., 45 
Kan. 503. 



THE LAW OF AGENCY 



[BOOK IV 



of the driver, made on the spot and immediately after the accident oc- 
curred, that it happened through his carelessness, were held inadmissi- 
ble; 98 so in an action against a railroad company for running over a 
man, evidence of admissions by one trainman to another immediately 
after the accident, was declared incompetent. 97 

1799. Illustrations Admissible declarations. But on 

the other hand in an action brought against a railroad company for 
negligently injuring the plaintiff, declarations made by the engineer 
immediately after stopping his train and backing up to the place of the 
accident, as to the reason why he did not stop his train before the acci- 



So where the statement was 
"soon after." Willis v. Atlantic 
& D. R. Co., 120 N. C. 508; Little 
Rock Traction & Electric Co. v. Nel- 
son, 66 Ark. 494; Weinkle v. Bruns- 
wick & W. R. Co., 107 Ga. 367; Boone 
v. Oakland Transit Co., 139 Cal. 490; 
Lissak v. Crocker Estate Co., 119 Cal. 
442. So a statement "just after," 
St. Louis S. Ry. Co. v. Brisco, 42 Tex. 
Civ. App. 321. So a statement "short- 
ly after," Harkins v. Queen Ins. Co. 
of America, 106 N. Y. App. Div. 170; 
and Dobbins v. Little Rock & E. Co., 
79 Ark. 85, 9 Ann. Cas. 84. So a 
statement by a trainman immediately 
after stopping the train, Memphis & 
C. R. Co. v. Womack, 84 Ala. 149. 
So engineer's statement at the next 
town, Frye v. St. Louis, I. M. & S. 
Ry. Co., 200 Mo. 377, 8 L. R. A. (N. 
S.) 1069. 

6 Ryan v. Gilmer, 2 Mont. 517, 25 
Am. Rep. 744. The declaration of a 
driver of a street car made as he was 
getting off the car immediately after 
running into the plaintiff, as to the 
cause of the accident, held inadmiss- 
ible in Luby v. Hudson River R. R. 
Co., 17 N. Y. 131. So the declaration 
of a street car driver immediately af- 
ter an accident that it was his fault, 
held inadmissible. Williamson v. 
Cambridge R. R. Co., 144 Mass. 148; 
and to same effect in Lane v. Bryant, 
9 Gray (Mass.), 245, 69 Am. Dec. 282, 
where Bigelow, J., says: "It is no 
more competent because made im- 
mediately after the accident than if 
made a week or a month afterwards." 



Statement a minute after accident 
held inadmissible. Lecklieder v. Chi- 
cago City Ry., 142 111. App. 139. 

7 Adams v. Hannibal & St. Joseph 
R. R. Co., 74 Mo. 553, 41 Am. Rep. 
333; also Koenig v. Union Depot Ry. 
Co., 173 Mo. 698; Butler v. Manhattan 
Ry. Co., 143 N. Y. 417. 42 Am. St. 
Rep. 738, 26 L. R. A. 46; St. Louis S. 
M. & S. Ry. Co. v. Kelley, 61 Ark. 52; 
Blackman v. West Jersey & S. R. Co., 
68 N. J. L. 1. 

Impeachment of witness. State- 
ments not admissible as part of the 
res gestae may sometimes be admit- 
ted for the purpose of impeaching a 
witness who has given contradictory 
or inconsistent testimony'; but in 
such cases the effect of the statement 
is to be confined to the impeachment 
merely and is not to be regarded aa 
evidence of the facts stated. Straight- 
Creek Coal Co. v. Haney (Ky.), 87 
S. W. 1114; International, etc., R. Co. 
v. Munn, 46 Tex. Civ. App. 276; Louis- 
ville, etc., R. Co. v. Davis (Ky.), 106 
S. W. 304; Colorado Midland Ry. Co. 
v. McGarry, 41 Colo. 398; Tennessee 
River Transportation Co. v. Kava- 
naugh, 101 Ala. 1; Radel v. Borches, 
147 Ky. 506, 39 L. R. A. (N. S.) 227; 
Kimic v. San Jose-Los Gatos Ry., 156 
Cal. 379; Aldridge v. Aetna L. Ins. 
Co., 204 N. Y. 83, 38 L. R. A. (N. S.) 
343; Walsh v. Carter-Grume Co., 126 
N. Y. App. Div. 229. 

Contra: Simms v. Forbes, 86 Miss. 
412, on the ground that the impeach- 
ing statement was hearsay and in- 
competent. 

378 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1799 



dent, were not only held to be competent, but similar declarations made 
by the engineer when he arrived at his destination about fifty minutes 
later, in making a report to his superior officer, were also admitted ; 98 
so in a case involving the liability of a railroad company for baggage 
lost by fire, the declarations of the baggage master as to the origin of 
the fire, made in view of the ruins but about fourteen hours after the 
fire, were admitted ; 09 so in a case where the accident was brought about 
by defective flanges on the wheels of the cars, the declarations of a 
general superintendent of the railway made on the scene of the wreck 
within three hours after it occurred were admitted ;* in the case of a 
mine accident, statements as to the previous unsafe condition of the 
appliances, made by a foreman on the ground while directing repairs 
and at a time variously estimated as from "immediately" to "half an 
hour" afterwards were admitted ; 2 in an action for injury caused by fire 
the statements of the servant who started the fire, made on the morning 
of the second day after, but while the fire was still burning, the injury 
complained of being still incomplete and while the servant was on the 
ground attempting to extinguish it were admitted ; 3 so statements made 
under varying circumstances, fifteen minutes, 4 five to ten minutes, 5 
six minutes, 6 five minutes, 7 three minutes, 8 two minutes 9 afterwards 



ssKeyser v. Chicago & G. T. Ry. 
Co., 66 Mich. 390. Both theories were 
confused here. 

9 Illinois Cent. R. R. Co. v. Tron- 
stine, 64 Miss. 834. (Although the 
court speaks of res gestae, this case 
could properly be put upon the other 
ground mentioned that the declara- 
tions were made by one whose duty 
it was to give such information.) 
Contra: Michigan Cent. R. R. Co. v. 
Carrow, 73 111. 348, 24 Am. Rep. 248. 

i Roberts v. Port Blakely Mill Co., 
30 Wash. 25 (this case is certainly 
doubtful on this point). See also, 
Filkington v. Gulf C. & S. F. Ry. Co., 
70 Tex. 226. 

a New York & Colo. Min. Syndi- 
cate & Co. v. Rogers, 11 Colo. 6, 7 
Am. St. Rep. 198. But the court 
mentioned several other grounds up- 
on which the statement might be ad- 
mitted and seemed not to be entirely 
clear as to the true one. 

8 Yazoo & Miss. Valley Ry. Co. v. 
Jones, 73 Miss. 229. It is to be noted 
that the statement was made while 



the fire was still raging and the in- 
jury complained of still incomplete. 
The point was not much elaborated. 
To the same effect: see Mobile & 
Ohio Ry. Co. v. Stinson, 74 Miss. 
453; and Paraffine Oil Co. v. Berry 
(Tex. Civ. App.), 93 S. W. 1089. 

4 Missouri K. & T. Ry. Co. v. Vance 
(Tex. Civ. App.), 41 S. W. 167. See 
also, City of Austin v. Nuchols, 42 
Tex. Civ. App. 5. 

5 Hupfer v. National Distilling Co., 
119 Wis. 417. This case goes wholly 
upon the theory of spontaneous 
declarations, and not upon that of 
agency, but the purpose of the decla- 
rations was to show negligence of 
the declarant as defendant's servant. 

San Antonio, etc., Ry. Co. v. Gray, 
95 Tex. 424. 

T Dewalt v. Houston, E. & W. T. Ry. 
Co., 22 Tex. Civ. App. 403. 

s Wilson v. Southern Pacific Co., IS 
Utah, 352, 57 Am. St. Rep. 766, 35 
L. R. A. 611. 

Gulf C. & S. F. Ry. Co. v. Tullis, 
4 Tex. Civ. 'App. 219; Coll v. 



1379 



i8oo] 



THE LAW OF AGENCY 



[BOOK iv 



have been held admissible ; so, in a number of cases, declarations made 
within so short a time after the occurrence as properly to be designated 
as immediately made have been held admissible. 10 

1800. When principal bound by agent's representation of ex- 
trinsic facts upon which authority depends. Where an agent's au- 
thority to act in a given case depends upon the existence of certain 
facts, it is ordinarily said to be incumbent upon a person proposing to 
deal with the agent to ascertain whether those facts exist. 11 But where 
the existence of those facts is a matter necessarily and peculiarly within 



Easton Transit Co., 180 Pa. 618; Ohio, 
etc., Ry. Co. v. Stein, 133 Ind. 243, 19 
L. R. A. 733. 

i O'Connor v. Chicago, etc., Ry. 
Co., 27 Minn. 166, 38 Am. Rep. 288; 
Hanover R. Co. v. Coyle, 55 Pa. 396; 
McLeod v. Ginther, 80 Ky. 399; Lit- 
tle Rock, etc., Co. v. Newman, 77 
Ark. 599; Bass v. Chicago, etc.. Ry. 
Co., 42 Wis. 654, 24 Am. Rep. i37; 
Brownell v. Pacific R. R. Co., 47 Mo. 
239; Toledo, etc., Ry. Co. v. Goddard, 

25 Ind. 185. Where a boy who had 
driven against a foot passenger on 
the street immediately stopped his 
horse and came back and said he 
did not mean to, Judge Cooley said: 
"It was as much a part of the res 
gestae as would have been an ex- 
clamation at the very instant the 
plaintiff was struck." Cleveland V. 
Newsome, 45 Mich. 62. 

To same effect are: Little Rock, 
etc., Ry. Co. v. Leverett, 48 Ark. 333, 
8 Am. St. Rep. 230; Pierce v. Van 
Dusen, 24 C. C. A. 280, 78 Fed. 693, 
69 L. R. A. 705; Sample v. Consoli- 
dated Light & Ry. Co., 50 W. 
Va. 472, 57 L. R. A. 186; Kansas 
City Southern Ry. Co. v. Moles, 
58 C. C. A. 29, 121 Fed. 351; 
Quincy Horse Ry. & Carrying Co. 
v. Gnuse, 137 111. 264; South Coving- 
ton C. St. Ry. Co. v. Riegler'-s Adm'r, 

26 Ky. Law Rep. 666, 82 S. W. 382; 
Cincinnati, etc., Ry. Co. v. Evans, 129 
Ky. 152; Louisville Ry. Co. V. John- 
Bon, 131 Ky. 277, 20 L. R. A. (N. S.) 
133; Springfield Consolidated Ry. Co. 



v. Welsch, 155 111. 511; Illinois Cent. 
R. Co. v. Cotter (Ky.), 103 S. W. 279; 
Zipperlan v. Southern Pac. Co., 7 Cal. 
App. 206; Alsever v. Minneapolis, 
etc., R. Co., 115 Iowa, 338, 56 L. R. A. 
748; Ohio, etc., Ry. Co. v. Stein, 133 
Ind. 243, 19 L. R. A. 733; United Ry. 
Co. v. Cloman, 107 Md. 681. 

In all the cases cited above the in- 
jury was caused by the alleged negli- 
gent management of cars or trains 
and the statements admitted were 
made while the person injured was 
present and still upon the ground or. 
under the car or wheels where he 
was injured. 

So statements have been admitted 
where made "within a very few 
minutes," Hermes v. Chicago & N. 
W. Ry. Co., 80 Wis. 590; engineer's 
statement about as soon as he stopped 
his train, Hooker v. Chicago, Milwau- 
kee & St. Paul Ry. Co., 76 Wis. 542; 
"at a very brief interval thereafter," 
Gulf C. & S. F. Ry. Co. v. Pierce, 7 Tex. 
Civ. App. 597; as soon after the ac- 
cident as the injured man got quiet, 
Young v. Seaboard Air Line Ry., 75 
S. C. 190; twenty-five minutes after 
but while trying to get help, Walters 
v. Spokane International Ry. Co., 58 
Wash. 293. 

In Omaha, etc., Ry. Co. v. Chollette, 
41 Neb. 578, the statements were 
practically contemporaneous with the 
event 

11 See ante, 756. The Freeman v. 
Buckingham, 18 How. (U. S.) 182, 15 
L. Ed. 341. 



1380 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ l8oi 

the agent's knowledge, the question has arisen whether the party deal- 
ing with him in good faith might not assume that giving information 
upon that point was within the scope of his authority, and rely upon the 
agent's representation ; and, particularly, whether, if the agent does the 
act which could only be properly done in case the facts do exist, the 
mere doing of the act, under such circumstances, may not properly be 
regarded as such a representation on his part that the facts, which are 
thus a condition precedent, do exist, as to bind his principal. This 
question has already been so fully considered in an earlier chapter 12 
that only a brief resume of it need be given here. 

The question has been considered with great fulness in New York, 
and in a leading case in that State 13 it is said : "It is a settled doctrine 
of the law of agency in this State, that where the principal has clothed 
his agent with power to do an act upon the existence of some extrinsic 
fact necessarily and peculiarly within the knowledge of the agent, and 
of the existence of which the act of executing the power is itself a rep- 
resentation, a third person dealing with such agent in entire good faith, 
pursuant to the apparent power, may rely upon the representation, and 
the principal is estopped from denying its truth to his prejudice. 
* * * If there be any exception to the rule within our jurisdiction, 
it arises in the case of municipal corporations, whose structure and 
functions are sometimes claimed to justify a more restricted liability." 14 

It is to be observed in these cases that the question here is not as to 
the existence, extent or nature of the agent's general authority : every 
one knows what his authority is, the question is as to the existence 
of certain extrinsic conditions or events upon which the right to exer- 
cise that authority depends, and the fact of their existence is peculiarly 
and necessarily within the agent's own knowledge. 

1801. Illustrations Bills of lading Warehouse re- 
ceipts Certified checks. In accordance with this rule, it was there 
held that a carrier which had authorized an agent to issue bills of lad- 
ing in its name, upon receipt of property for transportation, is liable 
upon a bill of lading issued by such agent and transferred by the ship- 

12 See ante, 759 et seq. R. R. Co., 65 N. Y. Ill, 22 Am. Rep. 

is Bank of Batavia v. New York, 603.] See also, Van Dolsen v. Board 

etc., R. R. Co., 106 N. Y. 195, 60 Am. of Education, 162 N. Y. 446; Bank of 

Rep. 440, 35 Am. L. Reg. 573. [Cit- Monongahela Valley v. Weston, 172 

ing North River Bank v. Aymar, 3 N. Y. 259. 

Hill (N. Y.), 262; Griswold v. Haven, As to this, see Town of Solon v. 

25 N. Y. 595, 82 Am. Dec. 380; New Williamsburgh Bank, 114 N. Y. 122; 

York, etc., R. R. Co. v. Schuyler, 34 Hoag v. Town of Greenwich, 133 N. 

N. Y. 30; Armour v. Michigan Cent. Y. 152. 

I 3 8l 



i8oi] 



THE LAW OF AGENCY 



[BOOK iv 



per to one who, on the faith of it, had discounted a draft on the con- 
signee, although in fact no property had been received by the carrier. 18 

Upon this particular application of the rule, the weight of authority 
is, doubtless, opposed, 16 but the doctrine of the New York court seems 
most consonant with reason and justice, and is sustained by a consider- 
able body of authority. 17 It is also adopted in the Uniform Bills of 
Lading Act. 1 * 

The New York court and others have applied the same doctrine to 
warehouse receipts, 19 and to certificates of stock issued apparently 



Bank of Batavia v. New York, 
etc., R. Co., 106 N. Y. 195, supra, 60 
Am. Rep. 440. 

is Grant v. Norway, 10 C. B. 665. 
(See also, Cox v. Bruce, 18 Q. B. Div. 
147. Compare Montaignac v. Shitta, 
15 App. Cas. 357); Friedlander v. 
Texas & Pac. Ry. Co., 130 U. S. 416, 
32 L. Ed. 991; Iron Mt. Ry. Co. v. 
Knight, 122 U. S. 79, 30 L. Ed. 1077; 
Pollard v. Vinton, 105 U. S. 7, 26 L. 
Ed. 998; The Freeman v. Bucking- 
ham, 18 How. (U. S.) 182, 15 L. Ed. 
341; The Lady Franklin, 8 Wall. (U. 
S.) 325, 19 L. Ed. 455. (See also, 
Missouri Pac. Ry. Co. v. McFadden, 
154 U. S. 155, 38 L. Ed. 944; The 
Guiding Star, 10 C. C. A. 454, 62 Fed. 
407; Planters' Fertilizer Co. v. Elder, 
42 C. C. A. 130, 101 Fed. 1001; Eccles 
v. Louisville, etc., R. Co., 198 Fed. 
898); National Bank of Commerce v. 
Chicago, etc., R. Co., 44 Minn. 224, 
20 Am. St. Rep. 566; Williams v. 
Wilmington, etc., R. Co., 93 N. Car. 
42, 53 Am. Rep. 450; Louisiana Nat'l 
Bank v. Laveille, 52 Mo. 380; Balti- 
more, etc., R. Co. v. Wilkens, 44 Md. 
11, 22 Am. Reo. 26 (immediately 
changed by statute; Lazard v. Mer- 
chants' Transportation Co., 78 Md. 
1). See also, Fellows v. Steamer 
Powell, 16 La. Ann. 316, 79 Am. Dec. 
581; Hunt v. Miss. Cent. R. Co., 29 La. 
Ann. 446; Sears v. Wingate, 3 Allen 
(Mass.), 103; Dean v. King, 22 Ohio 
St. 118; Lake Shore, etc., Ry. Co. v. 
Nat. Live Stock Bank, 178 111. 506. 
i 7 The New York rule is approved 

1382 



b^yrt li lo swuRVt land ^Ino 
in Brooke v. New York, etc., R. R. 
Co., 108 Penn. St. 529, reported also 
In note 53 Am. Rep. 453; Sioux City 
R. R. Co. v. First Nat. Bank, 10 Neb. 
556, 35 Am. Rep. 488; Wichita Sav- 
ings Bank v. Atchison, etc., Railroad 
Co., 20 Kan. 519 (Semble). 

The same doctrine was applied in 
Wisconsin in a case in which a bank 
had lands acquired in the payment 
of debts and wished to sell them: 
it was held that the question of 
which lands the bank had so acquired 
and had for sale was a fact peculiarly 
within the knowledge of the cashier, 
and his designation of the lands in 
engaging a broker to sell them bound 
the bank. Arnold v. National Bank, 
126 Wis. 362, 3 L. R. A. (N. S.) 580. 

is Paragraph 23. 

is See Bank of New York v. Ameri- 
can Dock & Trust Co., 143 N. Y. 559; 
Hanover Nat. Bank v. Am. Dock & 
Tr. Co., 148 N. Y. 612, 51 Am. St. 
Rep. 721; Corn Exchange Bank v. 
Am. Dock & Tr. Co., 163 N. Y. 332. 
But not when issued by the agent to 



himself, Bank of N. Y. v. Am. Dock 
& Tr. Co., supra; Hanover Nat. Bank 
v. Am. Dock & Tr. Co., supra. (Com- 
pare Ruben v. Great Fingall Consoli- 
dated, [1906] App. Cas. 439) unless 
his principal had assented to or ac- 
quiesced in such conduct. Corn Ex- 
change Bank v. Am. Dock & Tr. Co., 
supra. The New York rule is adopted 
in South Dakota. Fletcher v. Great 
Western Elevator Co., 12 S. D. 643. 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



upon the surrender of previous certificates, 20 but upon this point the 
English cases are opposed as in the case of the bill of lading. 21 

It is in accordance with the same principle that a bank is held liable 
upon a check, which its cashier has certified as good, although in fact 
the drawer had no funds, where third persons have in good faith ac- 
quired rights in such check relying upon the certificate. 22 

On the other hand, in Massachusetts, where an agent had authority 
to pledge his principal's credit so that at any time not more than a 
prescribed amount was involved, it was held that a third person in deal- 
ing with the agent was bound to find out how much the indebtedness 
incurred at any time actually was, and could not rely, as against the 
principal, upon what the agent said. 23 



20 New York, etc., R. Co. v. Schuy- 
ler, 34 N. Y. 30; Fifth Ave. Bank v. 
Forty-second St. R. Co., 137 N. Y. 
231, 33 Am. St. Rep. 712, 19 L. R. A. 
331; American Exch. Nat. Bank v. 
Woodlawn Cemetery, 120 N. Y. App. 
Div. 119; Jarvis v. Manhattan Beach 
Co., 148 N. Y. 652, 51 Am. St. Rep. 
727. See also, Tome v. Parkersburg, 
etc., R. Co., 39 Md. 36, 17 Am. Rep. 
540; Kisterbock's Appeal, 127 Pa. 601, 
14 Am. St. Rep. 868; Allen v. South 
Boston R. Co., 150 Mass. 200, 15 Am. 
St. Rep. 185, 5 L. R. A. 716. But not 
where the agent is acting for him- 
self. Moores v. Citizens' Nat. Bank, 
111 U. S. 156, 28 L. Ed. 385; Farring- 
ton v. South Boston R. Co., 150 Mass. 
406, 15 Am. St. Rep. 222, 5 L. R. A. 
849. See also, Ruben v. Great Fingall 
Consolidated, [1906] App. Cas. 439. 

21 Whitechurch v. Cavanagh, [1902] 
App. Cas. 117; British Mutual Bank- 
ing Co. v. Charnwood Forest Ry. Co., 
18 Q. B. Div. 714. See also, Ruben v. 
Great Fingall Consolidated, [1906] 
App. Cas. 439. But in Hambro v. 
Burnand, [1904] 2 K. B. 10, the court 
of appeal, distinguishing the above 
cases, held that where an agent had 
written authority to issue policies of 
insurance, a policy issued by him, 
conforming to the terms of the pow- 
er, was binding even though he is- 
sued it with a wrong motive and in 
abuse of his authority. 



Negotiable instruments. With ref- 
erence to strictly negotiable instru- 
ments, the New York rule as laid 
down in North River Bank v. Aymer, 
3 Hill, 262, is, as has been seen (ante, 
759, 760), generally followed. In 
Louisville Trust Co. v. Louisville, etc., 
R. Co., 22 C. C. A. 378, 75 Fed. 433, 
the New York rule was adopted to 
uphold the guaranty of corporate 
bonds in favor of bona fide purchas- 
ers as against the objection that cor- 
porate regulations had not been com- 
plied with in its execution. See as 
to this ante, 762. 

22 Hill v. Nation Trust Co., 108 
Penn. St. 1, 56 Am. Rep. 189; Mer- 
chants' Bank v. State Bank, 10 Wall. 
(U. S.) 604, 19 L. Ed. 1008; Espy v. 
Bank of Cincinnati, 18 Wall. (U. S.) 
604; Farmers', etc., Bank v. Butch- 
ers', etc., Bank, 16 N. Y. 125, 69 Am. 
Dec. 678; Irving- Bank v. Wetherald, 
36 N. Y. 335; Pope v. Bank of Al- 
bion, 59 Barb. (N. Y.) 226; Union 
Trust Co. v. Preston Nat. Bank, 136 
Mich. 460. See also, Second Nat. 
Bank v. Averell, 2 App. Cas. D. C. 
470, 25 L. R. A. 761. But not where 
he certifies his own check. Lee v. 
Smith, 84 Mb. 304, 54 Am. Rep. 101; 
Claflin v. Farmers' Bank, 25 N. Y. 
293; State v. Miller, 47 Oreg. 562, 6 
L. R. A. (N. S.) 365. 

23 Mussey v. Beecher, 3 Cush. 
(Mass.) 511. See also, Baines v. 



1383 



1802, 1803] THE LAW OF AGENCY [BOOK IV 

III 

THE EFFECT UPON THE PRINCIPAL'S RIGHTS AND OBLIGATIONS OF 
NOTICE TO OR KNOWLEDGE IN HIS AGENT 

1802. In general. The question frequently arises whether the 
principal may be affected not only by the agent's acts and contracts, 
but also by the knowledge which he may possess, or the notice which 
may come to him, respecting the subject matter of the agency, and 
which would have affected the principal had it come to or been in him 
while he was acting in person. The question has arisen in a great 
variety of forms, but the answer has been substantially uniform, and 
is commonly found stated in the language of the following section. 
Many reasons have been assigned, but they are all predicated upon the 
injustice which would result if the principal should be permitted to put 
forward an agent to transact business for him and at the same time 
escape the consequences which would have ensued from knowledge of 
conditions or notice of the rights and interests of others had the princi- 
pal transacted the business in person. "Policy and the safety of the 
public," it was said in a leading case, 24 "forbids a person to deny knowl- 
edge while he is so dealing as to keep himself ignorant, or so that he 
may keep himself ignorant, and yet all the while let his agent know, 
and himself perhaps profit by that knowledge. In such a case it would 
be most iniquitous and most dangerous, and give shelter and encourage- 
ment to all kinds of fraud, were the law not to consider the knowledge 
of one as common to both, whether it be so in fact or not." 

Stating this conclusion, first, in its most general and simple form 
1803. General rule Notice to the agent is notice to the princi- 
pal. It is the general rule, settled by an unbroken current of au- 
thority, that notice to, or knowledge of, an agent while acting within 
the scope of his authority and in reference to a matter over which his 
authority extends, .is notice to, or knowledge of, the principal. 26 This 

Ewing, 4 H. & C. 511, L. R. 1 Exch. Nixon v. Hamilton, 2 Dr. & W. 364, 1 

320; Lowell Savings Bank v. Win- Ir. Eq. R. 46; Toulmin v. Steere, 3 

Chester, 8 Allen (Mass.), 109. Mer. 210, 17 R. R. 67; In re Hennessy, 

24 Lord Chancellor Brougham, in 2 Dr. & War. 555, 5 Ir. Eq. R. 259; 
Kennedy v. Green, 3 Myl. & K. 699. Jennings v. Moore, 2 Vern. 609 (rati- 

25 In re Payne & Co., 73 L. J. Ch. fication); Preston v. Tubbin, 1 Vern. 
849, [1904] 2 Ch. 608, 91 .L. T. 777, 11 286; Espin v. Pemberton, 3 DeG. & J. 
Manson, 437; Kennedy v. Green, 3 547, 28 L. J. Ch. 311; Brotherton v. 
Mylne & Keen, 699; Dresser v. Nor- Hatt, 2 Vern. 574; Boursot v. Savage, 
wood, 17 C. B. (N. S.) 466; Le Neve 35 L. J. Ch. 627, L. R. 2 Eq. 134; 
v. Le Neve, Ambl. 436; Sheldon v. Frail v. Ellis, 16 Beav. 350, 22 L. J. 
Cox, -2 Eden, 224; Ashley v. Baillie, 2 Ch. 467; Tweedale v. Tweedale, 23 
Ves. 368; Maddox v. Maddox, 1 Ves. Beav. 341; Fuller v. Benett, 2 Hare, 
61; Downesv. Power, 2 Ball & B. 491; 394, 12 L. J. Ch. 355; Atterbury v. 

1384 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1803 



statement of it, however, is wholly tentative, and takes no account of 
the various exceptions to it. The fuller and more accurate statement 



Wallis, 8 DeG. M. & G. 454, 25 L. J. 
Ch. 792; Kettlewell v. Watson, 51 L. 
J. Ch. 281, 21 Ch. Div. 685, 46 L. T. 
83; Majoribanks v. Hovenden, Dru. 
11, 6 Ir. Eq. R. 238; Spaight v. Cowne, 
1 Hem. & M. 359; Holland v. Hart, 40 
L. J. Ch. 701, L. R. 6 Ch. 678, 25 L. 
T. 191; Dickerson v. Matheson, 50 
Fed. 73; Chicago St. P. M. & O. Co. 
v. Belliwith, 28 C. C. A. 358, 83 Fed. 
437; Hoffmann v. Mayaud, 35 C. C. A. 
256, S3 Fed. 171; United States v. 
Smith, 181 Fed. 545; Carter v. Gray, 
79 Ark. 273; Union, etc., Ins. Co. v. 
Robinson, 78 C. C. A. 268, 148 Fed. 
358, 8 L. R. A. (N. S.) 883; Reed v. 
Munn, 148 Fed. 737; McCalmont v. 
Lanning, 154 Fed. 353; Brown v. 
Cranberry Iron Co., 72 Fed. 96, 18 C. 
C. A. 444; Alger v. Keith, 44 C. C. A. 
371, 105 Fed. 105; Stanley v. 
Schwalby, 162 U. S. 255, 40 L. Ed. 
960; Armstrong v. Ashley, 204 U. S. 
272, 51 L. Ed. 482; Russell v. Peavy, 
131 Ala. 563; Kelly v. Burke, 132 Ala. 
235; Lea v. Iron Belt. Merc. Co., 147 
Ala. 421, 119 Am. St. Rep. 93; Trad- 
ers Ins. Co. v. Letcher, 143 Ala. 400; 
Wheeler v. McGuire, 86 Ala. 398, 2 L. 
R. A. 808; Bessemer Land Co. v. Jen- 
kins, 111 Ala. 135, 56 Am. St. Rep. 26; 
Edson & Foulhe Co. v. Winsell, 160 
Cal. 783; Carter v. Grey, 79 Ark. 273; 
Allison v. Falconer, 75 Ark. 343; 
Skillern v. Baker, 82 Ark. 86, 118 
Am. St. Rep. 52, 12 Ann. Gas. 243; 
Hunter v. Watson, 12 Cal. 363, 73 Am. 
Dec. 543; Chapman v. Hughes, 134 
Cal. 641; Pac. Lumber Co. v. Wilson, 
6 Cal. App. 561; Farmers, etc., 
Bank v. Payne, 25 Conn. 444, 68 
Am. Dec. 362; Johnson v. Tribbey, 27 
App. D. C. 281; Decree 22 App. D. C. 
368, affirmed Armstrong v. Ashley, 
204 U. S. 272, 51 L. Ed. 482; New 
York, etc., Ry. v. Russell, 83 Conn. 
581; Saulsbury v. Wimberly, 60 Ga. 
78; Thompson v. Overstreet, 80 Ga. 
767; Githens v. Murray, 92 Ga. 748; 



Am. St. Rep. 241; People's Savings 
Bank v. Smith, 114 Ga. 185; Collins 
v. C^ews, 3 Ga. App. 238; Pursley v. 
Stahley, 122 Ga. 362; Burton v. 
Perry, 146 111. 71; Fischer v. Tuohy, 
186 111. 143; Booker v. Booker, 208 
111. 529, 100 Am. St. Rep. 250; Cowan 
v. Curran, 216 111. 598; Lowden v. 
Wilson, 233 I1L 340; Merchants Nat 
Bank v. Nichols, 223 111. 41; Sterling 
Bridge Co. v. Baker, 75 111. 139; Shep- 
pard v. Wood, 78 111. App. 428; 
Mackay-Nisbit Co. v. Kuhlman, 119 
111. App. 144; Shumacher v. Wolf, 125 
111. App. 81; Merchants Nat. Bank v. 
Nichols & Shepherd, 123 111. App. 430, 
affirmed 223 111. 41; Marion Mfg. Co. 
v. Harding, 155 Ind. 648; Field v. 
Campbell, 164 Ind. 389, 108 Am. St. 
Rep. 301; Miller v. Pfeiffer, 168 Ind. 
219; Baldwin v. St. Louis K. & N. W. 
Ry. Co., 75 Iowa, 297, 9 Am. St. Rep. 
479; McMaken v. Niles, 91 Iowa, 628; 
Mason v. Simplot, 119 Iowa, 94; 
Campbell v. Park, 128 Iowa, 181; 
Ware v. Heiss, 133 Iowa, 285; First 
Nat. Bank v. Gunhus, 133 Iowa, 409. 
9 L. R. A. (N. S.) 471; Sowler v. Day, 
58 Iowa, 252; Condon v. Barnum 
(Iowa), 106 N. W. 514; Merritt v. 
Huber, 137 Iowa, 135; Van Buren 
County v. Am. Surety Co., 137 Iowa, 
490, 126 Am. St. Rep. 290; Roach v. 
Karr, 18 Kan. 529, 26 Am. Rep. 788; 
Hardten v. State, 32 Kan. 637; Bram- 
blett v. Henderson (Ky.), 41 S. W. 
575; Day v. Exchange Bank of Ken- 
tucky, 25 Ky. Law Rep. 1449, 78 S. 
W. 132; Sebald v. Citizens Bank 
(Ky.), 105 S. W. 130; Connolley v. 
Beckett (Ky.), 105 S. W. 446; Miller 
v. Jones (Ky.), 107 S. W. 783; Ger- 
man Ins. Co. v. Goodfriend, 30 Ky. 
Law Rep. 218, 97 S. W. 1098; Schwind 
v. Boyce, 94 Md. 510; Maryland Trust 
Co. v. Nat. Mec. Bank, 102 Md. 608; 
Jaquith v. Davenport, 191 Mass. 415; 
Clark v. Roberts, 206 Mass. 235; Rus- 
sell v. Sweezey, 22 Mich. 235; Sand- 



Strickland v. Vance, 99 Ga. 531, 59 ford v. Nyman, 23 Mich. 326; Peoria 

1385 



i8o 3 ] 



THE LAW OF AGENCY 



[BOOK iv 



of the rule is reserved for a later section, 28 after the subject has been 
more completely developed. 



Ins. Co. v. Hall, 12 Mich. 202; Taylor 
v. Young, 56 Mich. 285; Campau v. 
Konan, 39 Mich. 362; Thompson v. 
Village of Mecosta, 141 Mich. 175; 
Brown v. Harris, 139 Mich. 372; Geel 
v. Goulden, 168 Mich. 413; Union 
Central Life Insurance Co. v. Smith, 
105 Mich. 353; Tilleny v. Wolverton, 
50 Minn. 419; St. Paul & M. Trust 
Co. v. Howell, 59 Minn. 295; Jeffer- 
son v. Leithauser, 60 Minn. 251; Kel- 
ley v. Citizens Mut Ass'n, 96 Minn. 
477; Robertson Lumber Co. v. Ander- 
son, 96 Minn.. 527; Lindgren v. Will- 
iam Bros., 112 Minn. 186; Reynolds 
v. Ingersoll, 11 Smedes & M. (Miss.) 
249, 49 Am. Dec. 57; Ross v. Houston, 
25 Miss. 591, 59 Am. Dec. 231; 111. 
Cent. R. Co. v. Bryant, 70 Miss. 665; 
Equitable Sureties Co. v. Sheppard, 
78 Miss. 217; Hedrick v. Beeler, 110 
Mo. 91; Hickman v. Green, 123 Mo. 
165, 29 L. R. A. 39, 22 S. W. 455, 
affirmed 27 S. W. 440; Priddy v. 
MacKenzie, 205 Mo. 181; King v. 
Rowlett, 120 Mo. App. 120; Coombs 
v. Barker, 31 Mont. 526: Farmers 
& Merchants Ins. Co. v. Wiard, 59 
Neb. 451; Modern Woodmen of 
America v. Colman, 68 Neb. 660; 
Pringle v. Mod. Woodmen of Ameri- 
ca, 76 Neb. 384; Henry v. Omaha 
Packing Co., 81 Neb. 237; Brook- 
house v. Union Pub. Co., 73 N. H. 368, 
111 Am. St. Rep. 623, 6 Ann. Gas. 675, 
2 L. R. A. (N. S.) 993; Warren v. 
Hayes, 74 N. H. 355; Decree (Ch. 
1905), 69 N. J. Eq. 580, affirmed, 
Boice v. Conover, 71 N. J. Eq. 269; 
Vulcan Detinning Co. v. American 
Can Co., 70 N. J. Eq. 588; Clement 
v. Young-McShea Amusement Co., 70 
N. J. Eq. 677, 118 Am. St. Rep. 747; 
Lockhart v. Washington Gold Min- 
ing Co., 16 New Mex. 223; Weis- 
ser v. Denison, 10 N. Y. 68, 61 Am. 
Dec. 731; Consolidated Fruit Jar Co. 
v. Wisner, 103 N. Y. App. Div. 453; 



Badger v. Cook, 117 N. Y. App. Div. 
328; Brooklyn Distil. Co. v. Standard 
Distil. Co., 120 N. Y. App. Div. 237; 
Gregg V. Baldwin, 9 N. D. 515; Aet- 
na Indemnity Co. v. Schroeder, 12 N. 
D. 110; Barnes v. McClinton, 3 Pen. 
& Watts (Penn.), 67, 23 Am. Dec. 62; 
Small v. Housman, 142 N. Y. App. 
Div. 760; Jefferson County Bank v. 
Dewey, 197 N. Y. 14; John Monks & 
Sons v. West Street Improvement 
Co., 149 N. Y. App. Div. 504; Lam- 
bert v. Jenkins, 112 Va. 376; Cook 
v. American Tubing Co., 28 R. I. 41, 
9 L. R. A. (N. S.) 193; Salinas v. 
Turner, 33 S. C. 231; American Free- 
hold Land Mortgage Co. of London v. 
Felder, 44 S. C. 478; Wardlaw v. 
Troy Oil Mill, 74 S. C. 368, 114 Am. 
St. Rep. 1004; Blowers v. Southern 
Ry., 74 S. C. 221; Sparkman v. Sup. 
Council American Leg. of Honor, 57 
S. C. 16; Gibbes Machinery Co. v. 
Roper, 77 S. C. 39; Lindquistv. North- 
western, etc., Co., 22 S. Dak. 298; 
Woodfolk v. Blount, 3 Hay. (Tenn.) 
147, 9 Am. Dec. 736; Nashville, etc., 
R. R. Co. v. Elliott, 1 Coldw. (Tenn.) 
611, 78 Am. Dec. 506; U. S. v. Schwal- 
by, 87 Tex. 604; Grayson County Nat. 
Bank v. Hall (Tex. Civ. App.), 91 
S. W. 807; Flynt v. Taylor (Tex. Civ. 
App.), 91 S. W. 864; Morrill v. Bos- 
ley, 40 Tex. Civ. App. 7; Security 
Mut. Life Ins. Co. v. Calvert (Tex. 
Civ. App.), 100 S. W. 1033; Lips- 
comb v. Houston & Texas, etc., Ry., 
95 Tex. 5, 93 Am. St. Rep. 804, 55 
L. R. A. 869; Foote v. Utah Com- 
mercial & Savings Bank, 17 Utah, 
283; Black & Sons v. Johnson, 65 W. 
Va. 518; Backman v. Wright, 27 Vt. 
187, 65 Am. Dec. 187; Corliss v. 
Smith, 53 Vt. 532; Mack Mfg. 
Co. v. Smoot, 102 Va. 724; Fore- 
man v. German Alliance Ins. Co., 
104 Va. 694, 113 Am. St. Rep. 
1071, 3 L. R. A. (N. S.) 444; 



26 See post, 1813. 
I 3 86 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1804 



1804. 



Illustrations. The cases in which this rule has 



been applied are too numerous for specific statement, but the following 
cases will serve as illustrations of the application of the rule. Thus, 
where an agent acts for his principal in the purchase or other acqui- 
sition of property or securities, notice to the agent of unrecorded 
deeds 27 or mortgages, or of liens upon 28 or equities 29 against the prop- 
erty, or of defects or infirmities in the title, 30 will be imputed to the 
principal. So where an agent acts for his principal in the loaning of 
money, the principal will be affected by the knowledge of the agent as 
to who the real borrower is. 31 The same rule applies where an agent 
authorized to purchase notes had notice that they were "tainted with 
usury ;" 32 where an agent authorized to receive money had notice that 
it was being taken from a trust fund; 33 where an agent buying stock 
in a bank had notice that its capital was impaired ; 3 * where an agent 
doing business with a firm had notice of the withdrawal of a partner ; 35 



Traders & Trucksters Bank v. Black, 
108 Va. 59; Lynch v. Kineth, 
36 Wash. 368, 104 Am. St. Rep. 958; 
Haynes v. Gay, 37 Wash. 230; Allen 
v. Treat, 48 Wash. 552; Elliott v. 
Knights of Modern Mac., 46 Wash. 
320, 13 L. R. A. (N. S.) 856; Knott v. 
Tidyman, 86 Wis. 164; Peterson v. El- 
holm, 130 Wis. 1. [This list does 
not purport to be complete.] 

Under statutes. Whether notice 
to an agent is notice to his princi- 
pal under statutes providing for no- 
tice, must depend upon the circum- 
stances and the statute. In many 
cases, it will be clear that a personal 
notice was contemplated. See Street 
Lumber Co. v. Sullivan, 201 Mass. 
484, 16 Ann. Gas. 354. 

2?McMaken v. Niles, 91 Iowa, 628; 
Harrell v. Broocks, 52 Tex. Civ. App. 
334; so a recorded mortgage. Field 
v. Campbell, 164 Ind. 389, 108 Am. St. 
Rep. 301. 

28Schwind v. Boyce, 94 Md. 510; 
Fischer v. Tuohy, 186 111. 143. 

29 Knott v. Tidyman, 86 Wis. 164; 
Morris v. Georgia Loan Co., 109 Ga. 
12, 46 L. R. A. 506; Henry v. Sneed, 
97 Mo. 407, 17 Am. St. Rep. 580; Mul- 
lanphy Sav. Bank v. Schott, 135 
111. 655, 25 Am. St. Rep. 401; 
Johnston Harvester Co. v. Miller, 72 
Mich. 265, 16 Am. St. Rep. 536; Hed- 

1387 



rick v. Beeler, 110 Mo. 91; Coombs v. 
Barker, 31 Mont. 526; Huff v. Farwell, 
67 Iowa, 298; Cassiday, etc., Co. v. 
Terry, 69 W. Va. 572. 

so Stanley v. Schwalby, 162 U. S. 
255, 40 L. Ed. 960; Brown v. Cran- 
berry Iron & Coal Co., 18 C. C. A. 
444, 72 Fed. 96; Bramblett v. Hen- 
derson (Ky.), 41 S. W. 575; Hick- 
man v. Green, 123 Mo. 165, 29 L. R. 
A. 39; so insurance agents' notice of 
incumbrances on the property. Farm- 
ers & Mer. Ins. Co. v. Wiard, 59 Neb. 
451. 

31 American Land Mortgage Co. of 
London v. Felder, 44 S. C. 478; 
Salinas v. Turner, 33 S. C. 231; 
Strickland v. Vance, 99 Ga. 531, 59 
Am. St. Rep. 241; Russell v. Peavy, 
131 Ala. 563; so knowledge of the 
cashier of a bank in regard to bor- 
rower's security. Foote v. Utah, 
Com. & Sav. Bank, 17 Utah, 283. 

32 Haynes v. Gay, 37 Wash. 230; 
Sheppard v. Wood, 78 111. App. 428. 

33 Manson v. Simplot, 119 Iowa, 94; 
Chapman v. Hughes, 134 Cal. 641. 

3* Day v. Exchange Bank of Ken- 
tucky, 117 Ky. 357. 

ssGithens v. Murray, 92 Ga. 748; 
Straus Gunst. Co. v. Sparrow, 148 N. 
C. 309; Jenkins v. Renfrew, 151 N. 
C. 323: 



i8o 4 ] 



THE LAW OF AGENCY 



[BOOK iv 



where an agent authorized to sell goods had notice of the mental in- 
capacity of the vendee ; 38 where an agent making a sale of land had no- 
tice as to who the real purchaser was ; ST where a sales agent had notice 
of defects in machinery sold by him with a warranty ; 88 where an agent 
in charge of a lumber yard had notice of the dangerous manner in 
which the lumber was piled; 89 where a leasing agent had notice that 
the lessee was making improvements; 40 where an agent in whose de- 
partment it was to receive such notice had notice of the assignment of 
a claim ; 41 where an agent charged with the duty of receiving goods 
for export had notice that the exportation of the particular goods was 
prohibited;* 2 where an agent charged with the control of a team of 
horses had notice that they were in the habit of running away j 43 where 
a coachman having charge of a dog had notice that the dog was vi- 
cious. 4 * So knowledge of an attorney, present and acting for his client, 
as to the character of a document signed by his client, is imputed to the 
client.* 6 So where an agent had sufficient authority to institute an ac- 
tion based on his own knowledge, the principal was held to have notice 
of all the facts under which the agent acted. 46 



38 Kelly v. Burke, 132 Ala. 235; or 
of a notice not to sell to one who 
was an habitual drunkard. Jackson 
Co. v. Schmid, 141 Mo. App. 229. 

37 Tilleny v. Wolverton, 50 Minn. 
419. 

ss Marion Mfg. Co. v. Harding, 155 
Ind. 648; Buckeye Saw Co. v. Ruth- 
erford, 65 W. Va. 395. But see, Neal 
v. Smith, 54 C. C. A. 226, 116 Fed. 20. 

so Baldwin v. St Louis K. & N. W. 
Ry. Co., 75 Iowa, 297, 9 Am. St. Rep. 
479. 

40 Jefferson v. Leithauser, 60 Minn. 
251. 

*i Illinois Cent. Ry. Co. v. Bryant, 
70 Miss. 665. 

42Dickerson v. Matheson, 50 Fed. 
73, affirmed 6 C. C. A. 466, 57 Fed. 
524. 

43 Lynch v. Kineth, 36 Wash. 368, 
104 Am. St. Rep. 958; Gropp v. 
Great Atlantic Tea Co., 141 N. Y. 
App. Div. 372; Henry v. Omaha Pack- 
ing Co., 81 Neb. 237. 

44 Baldwin v. Casella, 26 L. T. Rep. 
N. S. 707. Compare Stiles v. Cardiff 
Steam Nav. Co., 10 L. T. Rep. N. S. 

1388 



844, 33 L. J. Q. B. 310. See also, 
Brice v. Bauer, 108 N. Y. 428, 2 Am. 
St. Rep. 454. 

4G Chicago, etc., Ry. Co. v. Belli- 
with, 83 Fed. 437, 28 C. C. A. 358. 

46 Campau v. Konan, 39 Mich. 362. 

Knowledge of an attorney engaged 
in collecting a claim of mortgage not 
properly recorded, is notice to his 
principal. Littauer v. Houck, 92 
Mich. 162, 31 Am. St. Rep. 572. 

Where defendant's agent to con- 
tract for the delivery of flues knew 
or should have known the special 
purpose for which the flues were 
purchased, his knowledge is the 
principal's in determining liability 
for special damage to plaintiff for 
breach of contract. Neal v. Pender- 
Hyman Hdwe. Co., 122 N. Car. 104, 
65 Am. St. Rep. 697. 

Notice of a defective ceiling to an 
agent to collect rent and make re- 
pairs is chargeable to the principal 
In an action of damages by the ten- 
ant. Bollard v. Roberts, 130 N. Y. 
269, 14 L. R. A. 238. 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 



In a great variety of cases, too numerous to be enumerated here, no- 
tice to or knowledge of the agent acting for an insurance company has 
been imputed to his principal. 47 

1805. The theories of the rule a. Identification. Two gen- 
eral theories prevail as to the foundation upon which this rule is based, 
and the results of these respective theories are not entirely alike. The 
first finds the reason of the rule in the legal identity of the agent with 
the principal during the continuance of the agency in the fact that 
the agent, while keeping within the scope of his authority, is, as to the 
matters embraced within it, for the time being the principal himself, or, 
at all events, the alter ego of the principal the principal's other self. 
If the principal had acted in person, he would or would not, under the 
same circumstances, have received the notice or knowledge in person. 
In legal effect the situation should not be different where he acts by his 
agent. Whatever notice or knowledge, then, reaches the agent during 
this time and under these circumstances, in law reaches the principal, 
whether it does so in fact or not. It is thought to be the legitimate and 
necessary result of this view, therefore, that only such notice or knowl- 
edge as comes to the agent, while he is agent, is thus binding upon the 
principal. 4 * 



4? See ante, 1066-1073. Creed 
v. Sun F. Ins. Co., 101 Ala. 522, 23 
L. R. A. 177; Phoenix Ins. Co. v. 
Flemming, 65 Ark. 54, 39 L. R. A. 
789; Home Ins. Co. v. Mendenhall, 
164 111. 458, 36 L. R. A. 374; Hamil- 
ton v. Dwelling House Ins. Co., 98 
Mich. 535, 22 L. R. A. 527; Dailey v. 
Preferred, etc., Ass'n, 102 Mich. 289, 
26 L. R. A. 171; Humphreys v. Na- 
tional Ben. Ass'n, 139 Pa. 264, 11 L. 
R. A. 564; Bawden v. London, etc., 
Ass'n Co., F1892] 2 Q. B. 534. (This 
list does not purport to be complete.) 

48 "The agent stands in place of 
the principal, and notice therefore to 
the agent is notice to the principal; 
but he cannot stand in the place of 
the principal until the relation of 
principal and agent is constituted, 
and as to all the information which 
he previously acquired, the principal 
is a mere stranger." Sir John Leach 
in Mountford v. Scott, 3 Madd. 34. 
"It is only during the agency that 
the agent represents and stands in 



the shoes of the principal. Notice 
to him, then, is notice to the princi- 
pal. 'Notice to him twenty-four hours 
before the relation commenced is no 
more notice than twenty-four hours 
after it has ceased would be." 
Sharswood, J., in Houseman v. Gir- 
ard, etc., Building Ass'n, 81 Pa. 256. 
[But in Gunster v. Scranton, etc., 
Co., 181 Pa. 327, 59 Am. St. Rep. 650, 
the rule is said to be based upon the 
duty to communicate the informa- 
tion to the principal.] 

Somewhat of double ground was 
taken by the Supreme Court of 
Michigan: "The reason upon which 
the doctrine of notice to the agent 
being held notice to the principal 
rests, is that the agent is substituted 
in the place of, and represents, the 
principal in, the particular trans- 
action, and therefore while acting in 
such matters he takes the place of 
the principal, and the latter is bound 
by the agent's act in the light of 
the knowledge then possessed by the 



1389 



i8o6] 



THE LAW OF AGENCY 



[BOOK iv 



A theory of identification, however, which shall take the agent as it 
finds him, that is, with his then existing knowledge, is not difficult to 
imagine. It exists in other fields. If, for example, I buy a horse and 
then employ the former owner as driver, in determining my liability as 
his master to third persons for his negligent driving, his previous knowl- 
edge of the habits and characteristics of the horse would be taken into 
account; in determining his liability to me for negligent use of the 
horse, I should expect to take advantage of the same knowledge ; if now 
I should authorize him as my agent to sell the horse, why should not the 
same thing be true? 

1806. b. Conclusive presumption of communication. 

The other theory is based upon the rule that it is the duty of the agent 
to disclose to his principal all notice or knowledge which the agent 
may possess and which appears to be necessary for the principal's pro- 
tection or guidance. This duty the law conclusively presumes the 
agent to have performed, and, therefore, imputes to the principal what- 
ever notice or knowledge the agent then possessed, whether he in fact 
disclosed it or not. 40 According to this view it is immaterial when the 
agent obtained the information, if he then possessed it. 



agent." Marston, C. J., in Advertiser 
& Tribune Co. v. Detroit, 43 Mich. 
116. 

In Boursot v. Savage, L. R. 2 Eq. 
134, Kindersley, V. C., said: "It is 
a moot question upon what principle 
this doctrine rests. It has been held 
by some that it rests on this: that 
the probability is so strong that the 
solicitor would tell his client what 
he knows himself, that it amounts to 
an irresistible presumption that he 
did tell him; and so you must pre- 
sume actual knowledge on the part 
of the client. I confess my own im- 
pression is that the principle on 
which the doctrine rests is this: 
that my solicitor is alter ego; he is 
myself; I stand in precisely the same 
situation as he does in the trans- 
action, and therefore his knowledge 
is my knowledge; and it would be a 
monstrous injustice that I should 
have the advantage of what he 
knows without the disadvantage. 
But whatever be the principle upon 



which the doctrine rests, the doc- 
trine itself is unquestionable." 

49 "The general rule that a princi- 
pal is bound by the knowledge of 
his agent is based on the principle of 
law, that it is the agent's duty to 
communicate to his principal the 
knowledge which he has respecting 
the subject-matter of negotiation, 
and the presumption that he will per- 
form that duty." Bradley, J., in The 
Distilled Spirits, 11 Wall. (U. S.) at 
p. 367, 20 L. Ed. 167. See also, 
Irvine v. Grady, 85 Tex. 120. 

In New Jersey a somewhat differ- 
ent theory apparently prevails and 
the principal is only charged with no- 
tice where he would have acquired 
it if he had acted in person. See 
Sooy v. State, 41 N. J. L. 394; Wil- 
lard v. Denise, 50 N. J. Eq. 483, 26 
Atl. 29, 35 Am. St. Rep. 788; Vulcan 
Detinning Co. v. American Can Co., 
70 N. J. L. 588, 67 Atl. 339; Lanning 
v. Johnson, 75 N. J. L. 259, 69 Atl. 
490. 



1390 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1807, l8o8 

It is obvious that this is rather a justification of the. rule than a rea- 
son for it. A rule based upon the performance of a duty which, so far as 
the point here involved is concerned is one from which the agent can- 
not escape, from which the principal can not release him, and which 
the law conclusively presumes has been performed whether it has been 
in fact or not, seems to differ little from a purely arbitrary requirement. 

Its real justification is doubtless found in the conviction that it can 
not be tolerated that an agent shall act in a transaction, with his mind 
full of material knowledge respecting it, and yet the principal be wholly 
unaffected by that knowledge, merely because the agent happened to 
acquire it before the agency began. 

The courts have not, however, always recognized these differences, 
nor have their decisions in all cases been consistent with the theory 
adopted. 

1807. I. Notice acquired during agency. So far as that notice 
or knowledge which is acquired during the agency is concerned, the 
result under either theory is obviously the same. 

Such notice or knowledge is chargeable to the principal in the same 
manner, and with the same effect, as though it had been communicated 
to or acquired by him in person. 

As has been pointed out, it is, of course, entirely immaterial that the 
agent has not in fact communicated his information to the principal. 
If the. agent fails to do his duty in this respect, and the principal suffers 
injury thereby, he has his remedy against the agent. 

1808. II. Knowledge acquired prior to agency. With reference 
to knowledge acquired before the agency began, however, there is more 
difficulty, and the two theories lead to different results. The theory 
based upon the legal identity of the parties, as has been seen, limits the 
application of the rule to such notice or knowledge as was acquired dur- 
ing the agency. This was at first adopted by the English courts, 50 and 
has since been followed by many of the courts in the United States." 

. (' :/ or .noVifloO 

BO Preston v. Tubbin, 1 Vern. 287; ""It is well settled," said Shars- 

Brotherton v. Hatt, 2 Vern. 574; wood, C. J., "that the principal is 

Fitzgerald v. Fauconberg, Fitz Gib- only to be affected by knowledge ac- 

bon, 207; Lowther v. Carlton, 2 Atk. quired in the course of the business 

242; Warrick v. Warrick, 3 Atk. 291; in which the agent was employed." 

Worsley v. Scarborough, 3 Atk. 392; Houseman v. Girard, etc., Ass'n, 81 

Le Neve v. Le Neve, 3 Atk. 648; Pa. 256 [citing Hood v. Fahnestock, 

Mountford v. Scott, 3 Madd. 34 s. c. 8 Watts (Pa.), 489, 44 Am. Dec. 147; 

on appeal, 1 Turn. & Russ. 274; Bracken v. Miller, 4 Watts & Serg. 

Hiern v. Mill, 13 Ves. Jr. 114. See (Pa.) 102; Martin v. Jackson, 2 

also, Taylor v. Yorkshire Ins. Co.. Casey (27 Pa.), 504, 67 Am. Dec. 

[1913] 1 Irish, 1. 489]. See also, Wetzel v. Linnard, 

1391 



1809] 



THE LAW OF AGENCY 



[BOOK iv 



The other theory, however, based upon the duty of the agent to disclose 
to his principal all knowledge and information actually possessed by the 
agent in relation to the subject-matter of the agency, no matter when 
acquired, and therefore charging the principal with it, has since been 
firmly established by the English courts, 52 and has been adopted by the 
supreme court of the United States, 53 and by many of the states. 54 

1809. Requirement of present knowledge. It is indis- 
pensable to this rule imputing to the principal knowledge which the 
agent acquired before the creation of the agency, that it shall still be 
present in the agent's mind when he becomes charged with the duty of 



15 Pa. Sup. Ct. Rep. 503; Langen- 
heim v. Anschutz-Bradberry Co., 2 
Pa. Sup. Ct. 285; Bangor, etc., Ry. 
Co. v. American Slate Co., 203 Pa. 6. 
See also, the recent case declaring 
this the rule in Pennsylvania, al- 
though it is held otherwise by the 
United States supreme court. Satter- 
field v. Malone, 35 Fed. Rep. 445, 1 
L. R. A. 35. 

To the same effect are: Willis v. 
Vallette, 4 Mete. (Ky.) 186; Howard 
Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. 
Dec. 478; McCormick v. Wheeler, 36 
111. 114, 85 Am. Dec. 388; Mundine v. 
Pitts, 14 Ala. 84; Pepper v. George, 
51 Ala. 190; McCormick v. Joseph, 83 
Ala. 401; Wheeler v. McGuire, 86 
Ala. 398, 2 L. R. A. 808; Goodbar v. 
Daniel, 88 Ala. 583, 16 Am. St. Rep. 
76. [But see, Lea v. Iron Belt Merc. 
Co., 147 Ala. '421, 119 Am. St. Rep. 
93, 8 L. R. A. (N. S.) 279, since 
overruled in Hall, etc., Mach. Co. v. 
Haley Furn. Mfg. Co., 174 Ala. 190, 
56 South. 726]; Pritchett v. Sessions, 
10 Rich. (S. C.) L. 293; Weisser v. 
Denison, 10 N. Y. 68; 61 Am. Dec. 
731; Farmers, etc., Bank v. Payne, 25 
Conn. 444, 68 Am. Dec. 362; Bank of 
United States v. Davis, 2 Hill (N. 
Y.), 451; Hayward v. National Ins. 
Co., 52 Mo. 181, 14 Am. Rep. 400; 
Blumenthal v. Brainerd, 38 Vt. 402, 
91 Am. Dec. 349; Second Nat. Bank 
v. Curren, 36 Iowa, 555; Atchison, 
etc., R. R. Co. v. Benton, 42 Kan. 698; 
Kauffman v. Robey, 60 Tex. 308, 48 
Am. Rep. 264; Texas Loan Agency 
v. Taylor, 88 Tex. 47; Allen v. Gar- 



rison, 92 Tex. 546; Teagarden v. 

Lumber Co., Tex. , 154 S. W. 

973; Meyers V. Gerhart, 54 Wash. 
657. 

82 Dresser v. Norwood, 17 Com. 
Bench (N. S.), 466; Rolland v. Hart, 
L, R. 6 Ch. App. 678. 

53 The Distilled Spirits, 11 Wall. 
(U. S.) 356, 20 L. Ed. 167. 

"Schwind v. Boyce, 94 Md. 510; 
Trentor v. Pothen, 46 Minn. 298, 24 
Am. St. Rep. 225; Hunter v. Watson, 
12 Cal. 363, 73 Am. Dec. 543; Bierce 
v. Red Bluff Hotel, 31 Cal. 160; Hart 
v. Bank, 33 Vt. 252; Whitten v. Jen- 
kins, 34 Ga. 297; Day v. Wamsley, 
33 Ind. 145; Cummings v. Harsa- 
brauch, 14 La. Ann. 711; Hovey v. 
Blanchard, 13 N. H. 145; Bank v. 
Campbell, 4 Hump. (Tenn.) 394; 
Campau v. Konan, 39 Mich. 362; 
Chouteau v. Allen, 70 Mo. 290; Leb- 
anon Savings Bank v. Hollenbeck, 29 
Minn. 322; Abell v. Howe, 43 Vt. 403; 
Yerger v. Barz, 56 Iowa, 77; Fairfleld 
Savings Bank v. Chase, 72 Me. 226, 
39 Am. Rep. 319; Suit v. Woodhall, 
113 Mass. 391; Shafer v. Phoenix 
Ins. Co., 53 Wis. 361; Brothers v. 
Bank, 84 Wis. 381, 36 Am. St. Rep. 
932; Wilson v. Minnesota, etc., Ins. 
Ass'n, 36 Minn. 112, 1 Am. St. Rep. 
659; Constant v. University of Ro- 
chester, 111 N. Y. 604, 7 Am. St. Rep. 
769, 2 L. R. A. 734; Gaspard v. Four- 
teenth St. Store, 143 N. Y. App. Div. 
402; Snyder v. Partridge, 138 III. 
173, 32 Am. St. Rep. 130; Wright 
v. Hooker, 55 Tex. Civ. App. 47; 
Cabin Branch Min. Co. v. Hutchison, 



1392 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ I80 9 



acting with reference to the matter to which the knowledge relates. 55 
A principal may be affected by knowledge which he himself once had, 
but has now forgotten. He may also be affected by knowledge which 
his agent acquired or had during the agency and under such circum- 
stances as to make it notice, but which the agent has since forgotten. 58 
But he cannot be affected by information which one who is now his 
agent once had, but had forgotten before he became agent and before 


112 Va. 37, Ann. Gas. 1912, D. 93, and between the acts, it was said that no 



the many other cases cited in the 
following notes. 

ss Lebanon Savings Bank v. Hol- 
lenbeck, 29 Minn. 322; Dresser v. 
Norwood, 17 C. B. (N, S.) 466; The 
Distilled Spirits, 11 Wall. (U. S.) 
356, 20 L. Ed. 167; Fairfield Savings 
Bank v. Chase, 72 Me. 226, 39 Am. 
Rep. 319. 

Knowledge or notice will not bind 
if it does not appear to have been 
retained. Yerger v. Barz, 56 Iowa, 77. 
To the same effect: Brothers v. Bank 
of Kaukauna, 84 Wis. 381, 36 Am. 
St. Rep. 932; Wilson v. Minn. Farm- 
ers Ins. Ass'n, 36 Minn. 112, 1 Am. 
St. Rep. 659; Gregg v. Baldwin, 9 
N. D. 515. 

In Constant v. University of Ro- 
chester, 111 N. Y. 604, 7 Am. St. Rep. 
769, 2 L. R. A. 734, where an agent 
who acted for the defendant in tak- 
ing a mortgage, the agent, being an 
attorney in active practice, had 
eleven months before acted for the 
plaintiffs in taking a mortgage upon 
the same premises which was not re- 
corded, it was held that in the ab- 
sence of clear and satisfactory show- 
ing that the agent remembered the 
existence of the plaintiffs' mortgage 
when he acted for the defendant, no 
notice of the existence of the first 
mortgage could be imputed to de- 
fendant. To the same effect: Slat- 
tery v. Schwannecke, 118 N. Y. 543; 
Comey v. Harris, 133 N. Y. App. Div. 
686. 

In Equitable Securities Co. v. 
Sheppard, 78 Miss. 217, where the 
same sort of question was involved, 



court could assume, in the absence 
of clear and satisfactory proof, that 
the first act was present to the 
agent's mind. 

In Badger v. Cook, 117 N. Y. App. 
Div. 328, where a person had acted 
as agent in a transaction involving 
the ownership of cattle, and it ap- 
peared that while the cattle were 
still calves and before he became 
agent he had received notice of cer- 
tain facts respecting their owner- 
ship, it was held that this notice 
could not be imputed to his princi- 
pal unless it was shown by clear and 
satisfactory proof that he actually 
remembered it at the time of the 
transaction in question. 

In a number of cases information 
acquired apparently before the com- 
mencement of the agency has been 
held to be binding upon the princi- 
pal, no question being raised as to 
whether the agent ill fact remem- 
bered it or not; but they were all 
cases wherein the events constituted 
practically one continuous transac- 
tion, and there was probably no 
room for question that the agent ac- 
tually remembered. See Henry v. 
Omaha Packing Co., 81 Neb. 237; 
Walker v. Grand Rapids Flouring 
Mill Co., 70 Wis. 92; Brothers v. 
Bank of Kaukauna, 84 Wis. 381, 36 
Am. St. Rep. 932; White v. King, 53 
Ala. 162; Dunklin v. Harvey, 56 Ala. 
177; Wiley, Banks & Co. v. Knight, 
27 Ala. 336; Miller v. Jones (Ky.), 
107 S. W. 783. 

so Cox v. Pearce, 112 N. Y. 637, 3 
L. R. A. 563. 



but more than six years had elapsed 

88 1393 



i8io] 



THE LAW OF AGENCY 



[BOOK iv 



there were any facts to make it significant or any duty to report it or 
remember it or to govern one's conduct with reference to it. The 
agent's recollection must be not simply hazy and indefinite, but as defi- 
nite and precise as would be required if now coming to the agent for 
the first time. 57 It must also be present to his mind so nearly at least 
in relation to the actual transaction which it affects as to impose upon 
the agent the obvious duty to communicate it in reference to that trans- 
action ; it is sometimes said that it must be "present to his mind at the 
very time of the transaction in question." 58 The question is a question 
of fact, 59 and the burden of proving that the agent had such recollec- 
tion is held to be upon the party alleging it, and not upon the principal 
to show that the agent did not have it. 60 

The same considerations apply to the case in which the agent during 
the agency acquires knowledge respecting a matter not then so related 
to his authority as to make it notice, but which, it is alleged, subse- 
quently became notice because, with the information still in mind, he 
acts as agent respecting the subject matter to which the notice relates. 

1810. There may, however, doubtless be cases in which 

the information was received so immediately before the transaction as 



ST See Burton v. Perry, 146 Til. 71; 
Roderick v. McMeekin, 204 111. 625; 
Snyder v. Partridge, 138 111. 173, 32 
Am. St. Rep. 130. 

ss This is the language of Constant 
v. University of Rochester, 111 N. Y. 
604, 7 Am. St. Rep. 769, 2 L. R. A. 
734; Slattery v. Schwannecke, 118 N. 
Y. 543. 

so Gregg v. Baldwin, 9 N. D. 515. 
That the agent had received notice 
may be shown by circumstances as 
well as by direct evidence. Fore- 
man v. German Ins. Ass'n, 104 Va. 
694, 113 Am. St. Rep. 1071, 3 L. R. 
A. (N. S.) 444. But it must be fol- 
lowed up with proof that it was 
present in the agent's mind at the 
time of the transaction in question. 
Brown v. Cranberry Iron Co., 18 
C. C. A. 444, 72 Fed. 96. 

eo Constant v. University of Ro- 
chester, 111 N. Y. 604, 7 Am. St. Rep. 
769, 2 L. R. A. 734; Denton v. On- 
tario Bank, 150 N. Y. 126; Equitable 
Securities Co. v. Sheppard, 78 Miss. 
217; Morrison v. Bausemer, 32 Gratt. 
(Va.) 225; Johnson v. Nat. Exch. 

1394 



Pank, 33 Gratt. (Va.) 473; Foreman 
v. German Ins. Ass'n, 104 Va. 694, 
113 Am. St. Rep. 1071; Brown v. 
Cranberry Iron Co., 18 C. C. A. 444, 
72 Fed. 96; Red River Val. Land & 
Inv. Co. v. Smith, 7 N. D. 236. 

Not only is the burden of proof up- 
on the party alleging recollection, but 
in Constant v. University, supra, it is 
said that the burden is on the plaintiff 
to prove "clearly and beyond question" 
that the agent remembered; that the 
proof must be "clear and satisfac- 
tory," and that language is repeated 
in many New York cases. The same 
language is used in Equitable Secur- 
ities Co. v. Sheppard, supra. In Mor- 
rison v. Bausemer, supra, it is said 
that there must be "very strong evi- 
dence." 

In Equitable Securities Co. v. 
Sheppard, supra, the court goes so 
far as to say that it "appears that 
the courts will presume forgetfulness 
until overcome by evidence unless 
the occurrence was so recent as to 
make it incredible." 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ l8ll, l8l2 

to warrant the presumption that it could not have been forgotten. "It 
may fall to be considered," said Lord Eldon, "whether one transaction 
might not follow so close upon the other as to render it impossible to 
give a man credit for having forgotten it. I should be unwilling to 
go so far as to say that, if an attorney has notice of a transaction in 
the morning, he shall be held in a court of equity to have forgotten it 
in the evening; it must in all cases depend upon the circumstances." ul 

1811. This theory, however, recognizes certain excep- 
tions which are clearly founded upon and consistent with it. Thus the 
agent could not reasonably be expected to disclose information which, 
though once possessed by him, had been, in fact, forgotten. So the law 
would not compel him to disclose what it was his legal duty to conceal. 
So the agent could not be deemed to have disclosed information where, 
from his relations to the subject-matter, or his previous conduct, his 
agency relation was practically non existent. Subject to these excep- 
tions, it is believed that this theory is supported by the better reason 
and by a clear preponderance of authority. 

1812. What is meant by notice acquired "during the 

agency" or "prior to agency." When it is said that notice received 
by the agent "during the agency" is imputed to the principal it is neces- 
sary to consider when the agency in this respect is to be deemed to 
begin. When the agency relates to a single non-continuing transaction 
it would be clear that the notice to be imputed to the principal under 
this rule must relate to that transaction and come to the agent after 
he has undertaken to act with reference to it. Where the agent is em- 
ployed for a continuing period, but is to act with reference to a series 
of disconnected and unrelated transactions, the notice which is to af- 
fect the principal with reference to any such transactions must ordi- 

i In Mountford v. Scott, 1 Turn, that "it will be presumed that the 

& Russ. 274. agent retains the knowledge for a 

In Brothers v. Bank of Kaukauna, reasonable time." By this it is as- 

84 Wis. 381, 36 Am. St. Rep. 932, it sumed that the court means nothing 

is said "if the agent acquires his in- more than is meant by the quotation 

formation as recently as to make it above from the Wisconsin court, 

incredible that he should have for- "Knowledge acquired not only dur- 

gotten it, his principal will be bound, ing the continuance of his agency, 

although not acquired while trans- but also that possessed by him so 

acting the business of the principal." shortly prior to his employment as 

To same effect: see McDonald v. necessarily to give rise to the infer- 

Fire Ass'n of Phila., 93 Wis. 348; ence that it remained fixed in his 

Red River Val. Land & Inv. Co. v. memory when the employment be- 

Smith, 7 N. D. 236. gan," binds the principal. Chouteau 

In McClelland v. Saul, 113 Iowa, v. Allen, 70 Mo. 290. 
208, 86 Am. St. Rep. 370, it is said 

1395 



1813] THE LAW OF AGENCY [BOOK IV 

narily, to be deemed to be notice acquired during the agency, be notice 
which came to the agent after he had undertaken to act with reference 
to that transaction. "But where the agency is continuous and con- 
cerned with a business made up of a long series of transactions of a 
like nature, of the same general character, it will," it is said in one 
case, 62 "be held that knowledge acquired as agent in -that business, in 
any one or more of the transactions, making up from time to time the 
whole business of the principal, is notice to the agent and to the princi- 
pal, which will affect the latter in any other of those transactions in 
which that agent was engaged, in which that knowledge is material." 
Some consideration of the latter rule is necessary. Suppose an agent 
is employed for a period to buy cattle for his principal. While so em- 
ployed he receives information concerning the cattle of A. At that 
time it is not his duty and he does not expect then or ever to buy the 
cattle of A, for his principal, and he does not know and has no reason 
to believe that the principal then or ever expects to buy the cattle of A, 
either in person or through some other agent. 63 If, notwithstanding 
this, the principal should, either in person or through some other agent, 
buy the cattle of A, would he be affected with notice of the information 
which his agent had so received? It is assumed that he would not be. 
If, however, the purchase of A's cattle was an act which it was ex- 
pected this agent would perform and which he afterwards did perform, 
the notice would doubtless bind the principal, even though it was re- 
ceived before the agent had actually entered upon the negotiation of 
that particular purchase. And so even though the agent, as first sup- 
posed above, had, at the time he received the notice, no duty or expec- 
tation of buying the cattle of A, yet if he afterwards did buy them, 
with the information still in mind, the notice would' be imputed, in those 
states at least in which notice is imputed if actually remembered, though 
acquired previously, even though it were held not to be imputable un- 
der the rule above quoted, as notice acquired during the agency. 

1813. The resulting rule. After this much of consideration it 
is, perhaps, now desirable and possible to frame a rule which will be 

62Holden v. New York & Erie notice to the general attorney of a 

Bank, 72 N. Y. 286; Cragie v. Had- railroad company of a certain claim 

ley, 99 N. Y. 131, 52 Am. Rep. 9; given while no suit was pending in 

Brothers v. Bank of Kaukauna, 81 respect to it, before the matter had 

Wis. 381, 36 Am. St. Rep. 932; Foote been referred to him in any way, and 

v. Utah Commercial Bank, 17 Utah, while he had no duty in respect to 

it or any reason to attach import- 

es Thus in Atchison, etc., R. Co. v. ance to it, was not notice to the com- 

Benton, 42 Kan. 698, it was held that pany. 

1396 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 

fuller and more accurate than the general statement with which the 
discussion began. Stated with the qualifications which have been thus 
suggested, the rule deducible from these authorities may be said to be 
the followng: 

The law imputes to the principal, and charges him with, all notice 
or knowledge relating to the subject-matter of the agency which the 
agent acquires or obtains while acting as such agent and within the 
scope of his authority, or, according to the weight of authority, which 
he may previously have acquired, and which he then had in mind, 64 or 
which he had acquired so recently as to reasonably warrant the assump- 
tion that he still retained it. 85 Provided, however, that such notice or 
knowledge will not be imputed : (i) Where it is such as it is the agent's 
duty not to disclose; 68 (2) Where the agent's relations to the subject- 
matter are so adverse as to practically destroy the relation of agency ; 6T 
and, (3) Where the person claiming the benefit of the notice, or those 
whom he represents, colluded with the agent to cheat or defraud the 
principal. 68 

This rule does not depend, in either case, upon the fact that the agent 
has disclosed the knowledge or information to his principal ; subject to 
the exceptions named, the law conclusively presumes that he has done 
so, and charges the principal accordingly. 69 

The rule applies as well in the case of a servant as of an agent if the 
servant is really the master's representative in the matter ; 70 to the case 
of an undisclosed principal as to a disclosed one ; n and to the case of 
a special agent as well as to that of a general one. 72 

And when once notice has attached, the fact that there is no occasion 
to act upon or heed it until after the agent through whom it was ac- 
quired has ceased to be such or has changed his position, and the like, 
will be immaterial. 73 

e* See ante, 1809. 137 Iowa, 135; Martin v. Richards, 

es See ante, 1810. 155 Mass. 381; Lingren v. Williams 

66 See post, 1814. Bros. Mfg. Co., 112 Minn. 186; Schaaf 

67 See post, 1815. v. St. Louis Basket Co., 151 Mo. App. 
es See post, 1826. 35. Compare 1834, post. 

SB See The Distilled Spirits, 11 71 Street Lumber Co. v. Sullivan, 

Wall. (U. S.) 367; Dresser v. Nor- 201 Mass. 484, 16 Ann. Gas. 354. 

wood, 17 C. B. (N. S.) 466, and Brown v. Peoples Nat. Bank, 170 

many other cases cited in subsequent Mich. 416, 40 L. R. A. (N. S.) 657. 

sections. Of course, if notice which " Birmingham Trust Co. v. Louisi- 

would not be imputed is actually ana Sav. Bank, 99 Ala. 379, 20 L. R. 

communicated, it is effective. Hicks A. 600; Bland v. Shreveport Ry. Co., 

v. Southern Ry. Co., 63 S. Car. 559. 48 La. Ann. 1057, 36 L. R. A. 114; 

TO Higman v. Camody, 112 Ala. 267, United States National Bank v. For- 

57 Am. St. Rep. 33; Merritt v. Huber, stedt, 64 Neb. 855; Loring v. Brodie, 

1397 



i8i4] 



THE LAW OF AGENCY 



[BOOK iv 



Although the rule of notice is ordinarily invoked to charge the prin- 
cipal, it is also held that he may have the benefit of it in a proper case. 74 

The several qualifications upon the rule must now receive more de- 
tailed consideration. 

1814. The first exception Privileged communications. The 
first of the exceptions referred to in the statement of the rule, namely, 
that relating to knowledge which it is the agent's duty to some other 
principal not to disclose, is well settled, both in England and in this 
country. It is most frequently applied to the case of attorneys and 



134 Mass. 453. But in Great Western 
Ry. v. Wheeler, 20 Mich. 419, it was 
held that notice acquired by a form- 
er agent of such a casual and non- 
continuous fact as that certain ini- 
tials marked upon goods received for 
shipment indicated a certain con- 
signee would not be imputed to the 
company after he had ceased to be 
agent. 

74 Haines v. Starkey, 82 Minn. 230 
(a partnership case wherein an un- 
disclosed principal was given the 
benefit of his agent's knowledge as 
to the existence of a partnership); 
Harrison v. Legore, 109 Iowa, 618. 

75 Notice to attorney. The general 
question of notice to attorneys will 
be considered in the chapter devoted 
to attorneys. A distinction may be 
made between the attorney's employ- 
ment as a lawyer and as an agent, 
though the distinction is not always 
observed. The question here arises 
where he is employed as an agent-. 
It is held in many cases that notice 
to an attorney, while engaged in the 
performance of the business of his 
principal, is notice to the principal. 
Price v. Carney, 75 Ala. 546; Bierce 
v. Red Bluff Hotel Co., 31 Cal. ICC, 
Sweeney v. Pratt, 70 Conn. 274, 66 
Am. St. Rep. 101; Brown v. Oattis, 55 
Ga. 416; Hass v. Sternbach, 156 111. 
44; Blake v. Clary, 83 Me. 154; Shart- 
zer v. Mountain Lake Park Ass'n, 86 
Md. 335; Mayor v. Whittington, 78 
Md. 231; Bates v. Johnson, 79 Minn. 
354; Edwards v. Hillier, 70 Miss. 
803; Bank of Commerce v. Hoeber, 



88 Mo. 37, 57 Am. Rep. 359; Peeplrs 
v. Warren, 51 S. C. 560; Riordan v. 
Britton, 69 Tex. 198, 5 Am. St. Rep. 
37; Hyman v. Barmon, 6 Wash. 516; 
Rogers v. Palmer, 102 U. S. 263, 26 L. 
Ed. 164. 

It has, however, been held general- 
ly in many cases that knowledge ac- 
quired by an attorney while acting 
for one client will not affect a sub- 
sequent client. Hood v. Fahnestock, 
8 Watts (Pa.), 489, 34 Am. Dec. 489; 
Willis v. Vallette, 4 Mete. (Ky.) 186; 
McCormick v. Wheeler, 36 111. 114, 
85 Am. Dec. 388; Herrington v. Mc- 
Collum, 73 111. 476; McCormick v. 
Joseph, 83 Ala. 401; Pepper v. 
George, 51 Ala. 190; Terrell v. Bank, 
12 Ala. 502; Chapman v. Hughes, 134 
Cal. 641; Wittenbrock v. Parker, 102 
Cal. 93, 41 Am. St. Rep. 172, 24 L. R. 
A. 197; Bierce v. Red Bluff Hotel Co., 
31 Cal. 160; Martin v. Jackson, 27 
Pa. 504, 67 Am. Dec. 489; Allen v. 
McCalla, 25 Iowa, 464, 96 Am. Dec. 
56; Sante Fe R. R. v. Benton, 42 Kan. 
698; Haven v. Snow, 14 Pick. (Mass.) 
28; Lowther v. Carlton, 2 Atk. 242; 
Worsley v. Scarborough, 3 Id. 392; 
Warrick v. Warrick, 3 Id. 291; Camp- 
bell v. Benjamin, 69 111. 244; Warner 
v. Hall, 53 Mich. 371; Fidelity Trust 
Co. v. Baker, 60 N. J. Eq. 170; Tuck- 
er v. Tilton, 55 N. H. 223; Arrington 
v. Arrington, 114 N. C. 151; Neilson 
v. Weber, 107 Tenn. 161; Denton v. 
Ontario Co. Nat. Bank, 150 N. Y. 126; 
Akers v. Rowan, 33 S. Car. 451, 10 L. 
R. A. 705; Steinmeyer v. Steinmeyer, 
55 S. C. 9; Meuley v. Zeigler, 23 Tex. 



I 39 8 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ i8is 



others, upon whom rests the duty of maintaining a professional secrecy. 
This secrecy the law will not permit, much less require, to be violated. 
As is well said by Mr. Justice Bradley, "When it is not the agent's duty 
to communicate such knowledge, when it would be unlawful for him to 
do so, as, for example, when it has been acquired confidentially as at- 
torney for a former client in a prior transaction, the reason of the rule 
ceases, and in such a case an agent would not be expected to do that 
which would involve the betrayal of professional confidence, and his 
principal ought not to be bound by his agent's secret and confidential 
information." 7e 

1815. The second exception Agent acting adversely to prin- 
cipal. The rule imputing notice is usually based, as has been seen, 
upon the theory that it is the duty of the agent to communicate to his 
principal the knowledge possessed by him relating to the subject-matter 
of the agency, material to the principal's protection and interests, and 
the presumption that he has performed this duty. This presumption, 
however, it is said, will not prevail where it is certainly to be expected 
that the agent will not perform his duty, as where the agent, though 
nominally acting as such, is in reality acting in his own or another's in- 



88; Pacific Mfg. Co. v. Brown, 8 
,Wash. 347; Melms v. Pabst Brewing 
Co., 93 Wis. 153, 57 Am. St. Rep. 899; 
Union Nat. Bank v. German Ins. Co , 
18 C. C. A. 203, 71 Fed. 473. 

JMany of these cases can be recon- 
ciled upon the ground already point- 
ed out, namely, that the theory of 
legal identification, which is adopted 
in several states as the foundation 
for imputing notice, confines the ef- 
fect of the notice to the time when 
such identification exists, namely, 
the period when the agent is actually 
representing the principal. Other of 
the cases seem to have adopted the 
rule, without much consideration, as 
one peculiar to attorneys. Still oth- 
er of them, such as Wittenbrock v. 
Parker, supra, may be distinguished 
upon the ground that there was 110 
evidence that the attorney at the 
time actually remembered the infor- 
mation; or, like Tucker v. Tiltoii, 
Fidelity Trust Co. v. Baker, Arring- 
ton v. Arrington, supra, upon the 
ground that the notice formerly re- 



ceived had no real relation to the 
service which he was now called 
upon to perform.] 

And feo it has been held that 
knowledge acquired by an attorney 
while acting for one client will not 
affect another client for whom he is 
acting in another matter at the same 
time. Ford v. French, 72 Mo. 250. 
But if notice acquired before the 
agency is to be imputed in any case, 
and if the attorney really acts not 
as a lawyer, but as an agent, no rea- 
son is seen why he should stand up- 
on a different ground than other 
agents, and the better rule is be- 
lieved to be that in either case such 
notice binds the principal unless ac- 
quired under such circumstances as 
to make it privileged. Abell v. Howe, 
43 Vt. 403; Hunter v. Watson, 12 
Cal. 363, 73 Am. Dec. 543; Hart v. 
Bank, 33 Vt. 252; The Distilled 
Spirits, 11 Wall. (U. S.) at p. 367, 20 
L. Ed. 167. 

TO The Distilled Spirits, 11 Wall. 
(U. S.) 356, 20 L. Ed. 167; Melms v. 



1399 







THE LAW OF AGENCY 



[BOOK iv 



terest, and adversely to that of his principal." Much less will it be en- 
tertained where the agent is openly and avowedly acting for himself 
and not as agent. 7 * In such cases the presumption is that the agent will 
conceal any fact which might be detrimental to his own interests, rather 
than that he will disclose it. 



Pabst Brewing Co., 93 Wis. 153, 57 
Am. St. Rep. 899; Sebald v. Citizens 
Bank (Ky.), 105 S. W. 130. 

T> Thus in a leading case in this 
country, it is said: "While the 
knowledge of an agent is ordinarily 
to be imputed to the principal, it 
would appear now to be well estab- 
lished that there is an exception to 
the construction or imputation of 
notice from the agent to the princi- 
pal in case of such conduct by the 
agent as raises a clear presumption 
that he would not communicate thft 
fact in controversy, as where tho 
communication of such a fact would 
necessarily prevent the consumma- 
tion of a fraudulent scheme which 
the agent was engaged in perpetrat- 
ing." Devens, J., in Innerarity v. 
Merchants' National Bank, 139 Mass. 
332, 52 Am. Rep. 710 [citing Ken- 
nedy v. Green, 3 Myl. & Keene, 699; 
Cave v. Cave, 15 Ch. Div. 639; In re 
European Bank, 5 Ch. Ap. 358; In re 
Marseilles Extension Ry., L. R. 7 Ch. 
Ap. 161; Atlantic National Bank v. 
Harris, 118 Mass. 147; Loring v. 
Brodie, 134 Mass. 453.] 

This rule, however, went beyond 
the needs of the case at bar, as the 
agent was there acting openly as an 
adverse party. It is believed to be 
too wide, though some of the cases 
cited do seem to give it support. 
See also, Kennedy v. Green, 3 Myl. 
& Keene, 699; Dillaway v. Butler, 135 
Mass. 479; Findley v. Cowles, 93 
Iowa, 389; Shephard & Morse Lumber 
Co. v. Eldridge, 171 Mass. 516, 68 Am. 
St. Rep. 446, 41 L. R. A. 617; Indian 
Head Nat. Bank v. Clark, 166 Mass. 
27; United Security Co. v. Central 
Nat. Bank, 185 Pa. 586; Houghton v. 
Todd, 58 Neb. 360. 

Obviously, as between the princl- 



pal and his agent, the latter cannot 
claim that the principal must be 
deemed to have constructive notice 
of the agent's fraudulent acts which 
the agent was in fact diligently con- 
cealing from him. Sankey v. Alex- 
ander, Ir. Rep. 9 Eq. 259. 

In American Surety Co. v. Pauly, 
170 U. S. 133, 42 L. Ed. 977, supra, 
it is said: "The presumption that 
the agent informed his principal of 
that which his duty and the interests 
of his principal required him to 
communicate does not arise where 
the agent acts or makes declara 
tions not in execution of any duty 
that he owes to the principal, nor I 
within any authority possessed by / 
him, but to subserve simply his own 
personal ends or tp_ commit soniqj 
foaud agamsttheprincipal. In such' 
cases the "priricTpaT^s^ot bound by 
the acts or declarations of the agent 
unless it be proved that he had at 
the time actual notice of them, dr. 
having received notice of them, 
failed to disavow what was assumed 
to be said and done in his behalf." 
See also, Fidelity & Deposit Co. v. 
Courtney, 186 U. S. 342, 362, 46 L. 
Ed. 1193. 

Agent practicing fraud on third j 
person, not on principal. The fact *" 
that the agent is engaged in practic- 
ing a fraud not on his principal but 
upon the other party does not, it is 
held, defeat the rule imputing no- 
tice. Lockhart v. Washington Gold 
Min. Co., 16 N. Mex. 223. 

78 Speaking of the general rule, 
in Frenkel v. Hudson, 82 Ala. 158. 
60 Am. Rep. 736, Somerville, J., says: 
"It has no application, however, to a 
case where the agent acts for him- 
self, in his own interest, and ad- 
versely to that of the principal. Hia 



1400 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1815 



The case most frequently arising is that in which the agent is secretly 
engaged in prosecuting some fraudulent or illegal enterprise the suc- 
cess of which would be impaired or defeated by the disclosure to his 
principal of the notice or knowledge now sought to be imputed. The 
application of the rule is not, however, confined to cases of such actual 
fraud, but will extend, as has been stated, to cases in which the agent / 
is temporarily acting on his own account and adversely to his principal. * 

This exception has been applied in a great number and in a great 
variety of cases. 79 In many of them it seems to have been applied quite 



adversary character and antagonistic 
interests take him out of the opera- 
tion of the general rule, for two rea- 
sons: first, that he will very likely, 
in such case, act for himself, rather 
than for his principal; and, secondly, 
he will not be likely to communicate 
to the principal a fact which he is 
interested in concealing. It would 
be both unjust and unreasonable to 
impute notice by mere construction 
under such circumstances, and such 
is the established rule of law on this 
subject." [Citing Terrell v. Branch 
Bank of Mobile, 12 Ala. 502; Lucas 
v. Bank of Darien, 2 Stew. (Ala.) 
280; Wickersham v. Chicago Zinc 
Co., 18 Kan. 481, 26 Am. Rep. 784; 
Angell & Ames on Corp., 308, 
309; Story on Agency, 140.] See 
also, La Brie v. Cartwright, 55 Tex. 
Civ. App. 144; Commercial Bank v. 
Burgwyn, 110 N. Car. 267, 17 L. R. 
A. (N. S. }326; Johnston v. Short- 
ridge, 93 Mo. 227; First National 
Bank v. Briggs, 70 Vt. 594. 

79 Thus, see Whelan v. McCreary, 
64 Ala. 319; Frenkel v. Hudson, 82 
Ala. 158, 60 Am. Rep. 736; Pursley 
v. Stahley, 122 Ga. 362; Seaverns v. 
Presbyterian Hospital, 173 111. 414, 
64 Am. St. Rep. 125; Cowan v. Cur- 
ran, 216 111. 598; Merchants Nat. 
Bank v. Nichols & Co., 223 111. 41, 
7 L. R. A. (N. S.) 752; Metcalf v. 
Draper, 98 111. App. 399; Hummel v. 
Bank of Monroe, 75 Iowa, 689; Se- 
bald v. Citizens Bank (Ky.), 105 S. 
W. 130; Seixas v. Citizens Bank, 38 
La. Ann. 424; Richardson v. Watson, 
51 La. Ann. 1390; Allen v. South 



Boston Ry., 150 Mass. 200, 15 Am. St 
Rep. 185, 5 L. R. A. 716; Corcoran v. 
Snow Cattle Co., 151 Mass. 74; 
Brown v. Harris, 139 Mich. 372; 
Fort Dearborn Bank v. Seymour, 71 
Minn. 81; Keyser v. Hinkle, 127 Mo. 
App. 62; Houghton v. Todd, 58 Neb. 
360; Graham v. Orange Co. Bank, 
59 N. J. L. 225; Camden Safe De- 
posit Co. v. Lord, 67 N. J. E. 489; 
Henry v. Allen, 151 N. Y. 1, 36 L. R. 
A. 658; Benedict v. Arnoux, 154 N. 
Y. 715; First Nat. Bank v. German 
Am. Ins. Co. (N. Dak.), 134 N. 
W. 873; Gunster v. Scranton Illumi- 
nating Co., 181 Pa. 327, 59 Am. St. 
Rep. 650; Knobelock v. Germania 
Savings Bank, 50 S. Car. 259; Cooper 
v. Ford, 29 Tex. Civ. App. 253; 
Jungk v. Reed, 12 Utah, 196; First 
Nat. Bank v. Foote, 12 Utah, 157; 
Victor Gold, etc., Min. Co. v. Bank, 
15 Utah, 391; Traders, etc., Bank v. 
Black, 108 Va. 59; Baker v. Berry 
Hill, etc., Co., 112 Va. 280: In re 
Plankinton Bank, 87 Wis. 378; Cole 
v. Getzinger, 96 Wis. 559; Rock 
Springs Nat. Bank v. Luman, 5 Wyo. 
159; Thompson-Houston 'Co. v. Capi- 
tal Blec. Co., 12 C. C. A. 643, 65 Fed. 
341; Investment Co. v. Ganzer, 11 C. 
C. A. 371, 63 Fed. 647; Hudson v. 
Randolph, 13 C. C. A. 402, 66 Fed. 
216; Hart v. Bier, 74 Fed. 592; Waite 
v. Santa Cruz, 89 Fed. 619; Bank of 
Overton v. Thompson, 56 C. C. A. 
554, 118 Fed. 798; Union Central Life 
Ins. Co. v. Robinson, 78 C. C. A. 268, 
148 Fed. 358, 8 L. R. A. (N. S.) 883; 
Reed v. Munn, 80 C. C. A. 215, 148 
Fed. 737; American Surety Co. V. 



1401 



i8i6] 



THE LAW OF AGENCY 



[BOOK iv 



arbitrarily and without much consideration of the reasons involved. 
Many conflicting results have necessarily ensued, and have led to the 
necessity of a more careful investigation into the reason and scope of 
this exception. 

1816. Reasons for the exception. The reasons given 

Ifor the exception are not always the same. That most commonly given 
and relied upon is the one already stated, namely, that there is, from 
the circumstances, a presumption that the agent will not perform his 
duty. Another reason which has been suggested is that inasmuch as 
the pretended agent is, by the hypothesis, really acting on his own ac- 
count, he does not receive the notice as agent and while acting within 
the scope of his authority. 80 This is, of course, the identification the- 
ory. Another, which is very similar, is that inasmuch as he is really 
acting in pursuance of a fraudulent design and committing an inde- 
pendent fraud, his whole act, including the notice, is beyond the scope 
of his employment and therefore neither the act nor the knowledge re- 
lating to it, as matter of law, can be imputed to his principal. 81 



Pauly, 170 U. S. 133, 42 L. Ed. 977; 
Real Estate Trust Co. v. Washington, 
etc., Ry., 113 C. C. A. 124, 191 Fed. 
566; Lilly v. Hamilton Bank, 102 C. 
C. A. 1, 178 Fed. 73; Eccles v. Louis- 
ville, etc., R. Co., 198 Fed. 898. [This 
list does not purport to be exhaust- 
ive.] 

so Thus in In re Plankinton Bank, 
87 Wis. 378, it is said: "Where an 
officer or agent of the corporation 
himself deals with the corporation, 
it will not be charged with notice of 
the information which he possesses 
relating to the transaction, and which 
he does not disclose, for the reason 
that in such case he does not rep- 
resent the corporation, but is acting 
for himself, and ceases, pro hoc vice, 
to act as an agent of the corporation. 
The corporation, in such case, is in 
reality the adverse party, and the of- 
ficer does not act for it as its agent 
at all." 

So in Pursley v. Stahley, 122 Ga. 
362, it is said: "But when the agent 
departs from the scope of the agency, 
and begins to act for himself and not 
for the principal; when his private 
interest is allowed to outweigh his 



duty as a representative; when to 
communicate the information would 
prevent the accomplishment of his 
fraudulent scheme, he becomes an op- 
posite party, not an agent. The rea- 
son for the rule then ceases. Where, 
therefore, the agent who is an inter- 
mediary is guilty of independent 
fraud for his own benefit, the law 
does not impute to the principal no- 
tice of such fraud." 

si In Allen v. South Boston Rail- 
road, 150 Mass. 200, 15 Am. St. Rep. 
185, 5 L. R. A. 716, it 'was said: 
"The general rule is that notice to 
an agent, while acting for his princi- 
pal, of facts affecting the character of 
the transaction, is constructive notice 
to the principal. There is an exception 
to this rule when the agent is en- 
gaged in committing an independent 
fraudulent act on his own account, 
and the facts to be imputed relate to 
this fraudulent act. It is sometimes 
said that it cannot be presumed that 
an agent will communicate to his 
principal acts of fraud which he has 
committed on his own account in 
transacting the business of his prin- 
cipal, and that the doctrine of im- 



1402 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRL) PARTIES 



[ 



1817. 



Further of these reasons, A serious difficulty in 



the way of the adoption of the reason first assigned is found in the fact 
that it is not ordinarily a satisfactory theory for exempting the princi- 
pal to presume that his agent will not do, or has not done, his duty. 
That suggestion usually and properly meets with very little favor and 
it is certain that the exception cannot be sustained upon the grounds 
usually assigned for it. A more satisfactory reason would be to say, 
as has been suggested, that the assumed agent is not really acting as 
agent at all and therefore the general rule imputing knowledge has no 
application. Where the agent is openly and avowedly acting adversely 
or otherwise than as an agent, and the principal or some other agent 
is representing the principal's interests, there is little difficulty in reach- 
ing this conclusion. 82 And even where he is not openly acting ad- 



puted knowledge rests upon a pre- 
sumption that an agent will com- 
municate to his principal whatever 
he knows concerning the business he 
is engaged in transacting as agent. 
It may be doubted whether the rule 
and the exception rest on any such 
reasons. It has been suggested that 
the true reason for the exception is 
that an independent fraud committed 
by an agent on his own account is 
beyond the scope of his employment, 
and therefore knowledge of it, as 
matter of law, cannot be imputed to 
the principal, and the principal can- 
not be held responsible for it. On 
this view, such a fraud bears some 
analogy to a tort wilfully committed 
by a servant for his own purposes, 
and not as a means of performing the 
business intrusted to him by his mas- 
ter. Whatever the reason may be, 
the exception is well established." 

82 This was the fact in the leading 
case of Innerarity v. Merchants Na- 
tional Bank, 139 Mass. 332, 52 Am. 
Rep. 710, cited above (though it has 
been overlooked in many of the cases 
which purport to follow it). There 
an agent, who was also a director in 
the bank, undertook to pledge, for a 
loan to himself, a bill of lading which 
really belonged to his principal. He 
first negotiated the loan on this se- 
curity with the president of the bank. 



Later, when the board of directors 
met, the president laid this loan, with 
others, before the board for approval. 
The agent was present at this meet- 
ing, though the case says it does not 
appear what part, if any, he took in 
the action upon this loan. The board 
approved the loan. It was held that 
his knowledge was not imputable to 
the bank, and the court treated him 
like any other outsider who applied 
for a loan. It is clear that he was 
not the agent through whom the 
bank acted. 

The same is true of Corcoran v. 
Snow Cattle Co., 151 Mass. 74; Louisi- 
ana State Bank v. Senecal, 13 La. 
525; English- American Loan Co. v. 
Hiers, 112 Ga. 823; Traders Bank v. 
Black, 108 Va. 59; In re Plankinton 
Bank, 87 Wis. 378. 

This is also the ground upon which 
Lilly v. Hamilton Bank, 102 C. C. A. 
1, 178 Fed. 53, 29 L. R. A. (N. S.) 
558 is to be based. The court point 
out that the two agents, through 
whom notice to the bank might have 
been imputed, "studiously refrained 
from acting to any extent whatever 
as agents of the bank," but proposed 
to deal with the bank and left other 
agents of the bank to decide whether 
the proposal should be accepted. 
Similar are, National Bank v. Fen- 
ney, 9 S. Dak. 550, 46 L. R. A. 732; 



M03 



l8l8] THE LAW OF AGENCY [BOOK IV 

versely but has secretly such an adverse interest that he would not be 
permitted to become or remain an agent without his principal's full and 
intelligent consent, it would seem that the same result should ensue 
and that he should be treated as practically not an agent of the prin- 
cipal whose interests he is, for the promotion of his own ends, secretly 
betraying or ignoring. If this be done, however, what is the result? 
Either that the principal was in that transaction not represented by an 
agent at all and therefore, so far as it depends upon agency, there was 
no act of the principal, unless the principal later with knowledge elects 
to stand by it; or that the assumed agent dealt in this transaction as 
an independent party, giving to the principal the same rights and the 
same obligations which he would have if he were dealing with any 
other independent party. Where the principal did not, in fact, know 
anything about the transaction at the time and the whole matter was 
confined to the hands of the agent alone, the latter alternative seems too 
contrary to the facts to be accepted. 

1818. If it be said that there was no act, because there 

was no agent, then any contract or transfer involved in it must be of 
no effect, and if anything has come to the principal's possession by rea- 
son of the act, it must be surrendered if the act be repudiated. 83 Inas- 
much as the principal may consent to being represented by an interested 
agent, and may do so after the act as well as before, he may well, if he 

First Nat. Bank v. Babbidge, 160 cannot be fully applicable to a case 

Mass. 563; Louisiana State Bank v. where one party, having knowledge 

Senecal, 13 La. 525; Westfleld Bank of the invalidity of a paper of which 

v. Cornen, 37 N. Y. 320, 93 Am. Dec. he is the ostensible owner, discounts 

573. See also, Knobelock v. Germania it in a bank of which he is the duly 

Savings Bank, 50 S. Car. 259; Sproul authorized agent, and is himself the 

v. Standard Glass Co., 201 Pa. 103. only actor for the bank and by his 

83 in Morris v. Georgia Loan, Sav- act enables the bank to collect and 

ings & Banking Co., 109 Ga. 12, 46 L. retain the proceeds of such paper 

R. A. 506, the cashier of the bank against the rights of the true owner, 

was individually interested in a note In such a transaction he is either the 

which he knew to be without con- agent of the bank to discount the 

sideration. He discounted it to the paper, or he is not. If he is not, 

bank, and the bank claims now to be then the discounting was illegal, and 

a bona fide holder, without notice of the owner is entitled to it or its pro- 

the defense. The court, however, ceeds. If he is the agent of the bank, 

held it must stand charged with the and the facts insisted on here existed, 

notice of the cashier if it ratified his his action would be a fraud upon the 

act and claimed to own the note so rights of the owner, of which the 

discounted by it. The court distin- bank cannot take advantage." The 

guished the principle recognized court then adopts the excerpt from 

where an officer of a corporation is First Nat. Bank v. New Milford, 36 

the adverse party, and said: "But Conn. 93, quoted in the following 

the principle involved in those cases note. 

1404 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1818 



attempts with knowledge to obtain or retain benefits flowing from the 
act, be held to have approved it with all its incidents. 84 



84 Thus in a number of cases in 
which an agent, acting for both par- 
ties and being in default to one of 
them, has secretly abstracted funds 
or securities from the other to make 
good his deficiency to the former, 
it has been held that the one 
to whom they have been so trans- 
ferred cannot keep or enforce them, 
after knowledge, without being 
chargeable with notice. See Bank of 
New Milford v. Town of New Mil- 
ford, 36 Conn. 93. (The court 
said: "He [the cashier] as agent of 
the bank had full knowledge, there- 
fore, of the fraud; and now the bank, 
if they ratify his contract and con- 
firm his agency, must accept his 
knowledge and be bound by it, pre- 
cisely as if the loan had been made 
and the knowledge had by the board 
of directors.") Loring v. Brodie, 134 
Mass. 453; Atlantic Cotton Mills v. 
Indian Orchard Mills, 147 Mass. 268, 
9 Am. St. Rep. 698. (The court said: 
"It [the plaintiff] must be deemed to 
have known what he knew; and it 
cannot retain the benefit of his act 
without accepting the consequences 
of his knowledge. The plaintiff can- 
not obtain greater rights from his act 
than if it did the thing itself, know- 
ing what he knew.") Holden v. New 
York & Erie Bank, 72 N. Y. 286. 
(The court said: "The knowledge of 
Ganson [the common agent] as an 
individual or an executor was not 
imputable to the bank merely be- 
cause he was its president, but be- 
cause when it acted through him as 
president, in any transaction where 
that knowledge was material and ap- 
plicable, it acted through an agent 
who at that very time had knowl- 
edge of facts which gave a character 
to the transaction . . . and whose 
duty it was to make that knowledge 
known to his principal." And, hav- 
ing such knowledge, it was the bank's 
"duty to those interested in that 



money to refuse to take it upon de- 
posit to his individual account.") 
Fishkill Savings Institute v. Bost- 
wick, 19 Hun (N. Y.), 354; Fouche v. 
Merchants Nat. Bank, 110 Ga. 827. 
(The court said: "We do not see how 
it could claim the advantages and 
privileges of this possession and 
ownership without becoming charge- 
able with notice of the burdens 
it had likewise assumed, of which 
it had knowledge, through its 
president, when it thus became 
the owner of this property.") 
Singleton v. Bank, 113 Ga. 527; 
First National Bank of Monmouth 
v. Dunbar, 118 111. 625. (The 
case can be sustained on the ground 
that the bank acquired no right to 
the bonds except through the act of 
its cashier. If the cashier was au- 
thorized to receive these bonds, his 
notice is its notice. If he was not so 
authorized, the bank must ratify or 
repudiate his act. If it repudiates 
it, then it has never had any claim 
to them; if it ratifies the act, it must 
be charged with all knowledge its 
agent had. The case also comes with- 
in the exception to the general ex- 
ception suggested by the editors of 
the Case Note appended to Brook- 
house v. Union Publishing Co., 2 L. 
R. A. (N. S.) 993.) 

In Warren v. Dixon, 74 N. H. 355, 
the plaintiff had been defrauded of 
land, on which the defendant after- 
ward acquired, in good faith and for 
value, a mortgage. The defendant 
sent J. B. Dixon, an agent, who knew 
of the fraud on plaintiff, to collect 
the mortgage. The agent procured a 
conveyance of the land to defendant 
in satisfaction of her mortgage, but, 
in so doing, was in reality acting in 
the interests of the defendant's mort- 
gagor. The plaintiff seeks to compel 
her to hold the legal title impressed 
with notice of the fraud on him. The 
defendant denies the agency of her 



1405 



i8i8] 



THE LAW OF AGENCY 



[BOOK iv 



Of course, however, if the principal does not thus take with notice, 
the fact that he may afterwards acquire it will be as immaterial here as 
it is in other similar cases. 



representative, as he acted for the 
mortgagor, and she apparently claims 
nothing by the deed to her, but falls 
back on her mortgage which was hon- 
estly acquired. As to whether she is 
estopped to deny his agency for her, 
the court says: "Although the plain- 
tiff cannot maintain this action by 
merely showing that J. B. Dixon was 
in Mrs. Dixon's employ when the con- 
veyance was made, she cannot set 
that conveyance up to defeat the 
plaintiff's right to redeem the prop- 
erty from her. The reason is, not 
that she is charged with J. B. Dix- 
on's knowledge, but because a person 
cannot claim the benefit of so much 
of his agent's unauthorized act as is 
beneficial to him and repudiate the 
remainder. If he accepts any bene- 
fit from it after he knows and appre- 
ciates what his agent has done, he 
will be estopped to deny that the 
agent was acting for him. In other 
words, such conduct constitutes a 
ratification of the agent's act." See 
also, Morris v. Georgia Loan Co., 109 
Ga. 12, 46 L. R. A. 506; Brobston v. 
Penniman, 97 Ga. 527. 

To the same effect: Curtis v. Stur- 
gis, Jackson & Co., 64 Mo. App. 535; 
Smith v. Farrell, 66 Mo. App. 8; Wil- 
son v. Pauly, 18 C. C. A. 475, 72 Fed. 
129. See also, Black Hills Nat. 
Bank v. Kellogg, 4 S. Dak. 312. 

It is not to be denied that there are 
cases opposed to this view. Certain 
of the New Jersey cases, for exam- 
ple, can not be reconciled with it, 
though it does not appear that the 
point now urged against them was 
raised. See DeKay v. Hackensack 
Water Co., 38 N. J. Eq. 158; Camdpn 
Safe Deposit Co. v. Lord, 67 N. J. Eq. 
489; Barnes v. Trenton Gas L. Co., 27 
N. J. Eq. 33, though it does not clear- 
ly appear in all of them whether 
there was another agent acting for 
the principal or not. Cole v. Getz- 
inger, 96 Wis. 559, is apparently op- 

1406 



posed. So in First National Bank v. 
Foote, 12 Utah, 157, where it is said, 
"This is a distinction which seems 
to us less substantial than technical." 
Fort Dearborn Bank v. Seymour, 71 
Minn. 81, admits the principle, but 
denies its application to the facts at 
bar. 

In Hummell v. Bank of Monroe, 75 
Iowa, 689, one A was cashier of the 
defendant bank, to which he was con- 
siderably indebted. By fraudulent 
representations he procured from the 
plaintiff an accommodation note. In 
violation of his promise to the plain- 
tiff he negotiated this note to the Des 
Moines bank, receiving therefor a 
draft, which he cashed at his own 
bank, and therewith paid his in- 
debtedness and received non-nego- 
tiable cashier's checks for the resi- 
due. The plaintiff seeks to pur- 
sue the entire fund into defendant's 
hands, on the ground that the 
notice of their cashier being im 
puted to it, it had knowledge of the 
fraud by which the money was pro- 
cured. The court refused to charge 
it with such notice and held it was 
only liable for such sum as remained 
to A's credit when the bank was ac- 
tually-notified of the fraud. It was 
held that the doctrine of ratification 
did not apply to the case. The con- 
clusion in this case cannot be sus- 
tained except by force of the strict 
application of the exception to the 
rule of notice as it is ordinarily stat- 
ed. The bank acquired the drafts in 
question only through the act of its 
cashier. If it repudiated that act it 
could not retain the draft. It. would 
not seem that the bank could stand 
in the attitude 'of a purchaser from 
the cashier as an independent person 
because he did not deal with the 
bank as an independent person, and 
the bank was not Represented in the 
transaction by any other agenL. 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1819 



1819. But there may also be cases in which, because no 

act of agency resulted, the principal would be entitled to stand upon 
the footing of a transferee from the agent, or from the other principal 
whom he represented, and be entitled to protection to the same extent 
as any purchaser for value without notice. In such a case, there be- 
ing really no agency relation, notice could not be imputed upon that 
ground, and, if the principal had no notice which would bind him other- 
wise, he would be protected. 85 This result would not seem to be pos- 



ss Thus, in a number of cases in 
which the same person was ordinarily 
agent for each party but in the given 
case was acting as an outside party 
:so far as the principal in question 
was concerned, it has been held that 
if he fraudulently obtains from one 
principal that which he sells or trans- 
fers to the other who is acting for 
Jiimself, the latter who takes in good 
faith and for value cannot be charged 
with what the agent knew, since in 
this transaction he was not agent for 
the latter. 

Thus in Thompson-Houston Elec- 
tric Co. v. Capitol Electric Co., 12 C. 
C. A. 643, 65 Fed. 341, it appeared that 
one D., who was the agent of Mrs. R. 
to loan her money upon securities 
and who had received money from 
her for that purpose, which it was 
his duty to account to her for from 
time to time, was also the secretary, 
treasurer and general manager ol a 
certain corporation. He owed this 
corporation upon a note, and the note 
was secured by a deposit with the cor- 
poration of certain bonds which be- 
longed to D. This note and bonds 
were in his custody among the other 
papers of the corporation. In order 
to settle his account with Mrs. R. he 
induced an irresponsible person to 
give him a note. He them abstracted 
the bonds from the papers of the cor- 
poration, attached them to the note 
BO procured as though they had been 
Civen to secure it, and delivered the 
note and the bonds to Mrs. R. in 
Gettlement of his account with her. 
Mrs. R. received them in good faith 
and without actual notice of the claim 



of the corporation to the bonds. In 
an action to determine the title to 
them, it was contended that Mrs. R. 
must be charged with the knowledge 
which D. had respecting the rights 
of the corporation, and that therefore 
she cowld not hold the bonds as 
against it. It was held that his 
knowledge would not be imputed to 
her, and the exception now under 
discussion to the general rule was 
relied upon. But more specifically 
the court said: "When he abstracted 
the bonds he was not taking them for 
Mrs. R.; he was taking them for 
himself, so that he might use them 
to obtain money from Mrs. R. He 
was not abstracting them for the 
benefit of Mrs. R. any more than for 
the benefit of any stranger to whom 
he might have sold them for value. 
In delivering these bonds to Mrs. R., 
D was actually dealing with her as a 
purchaser from him and not as her 
agent." And, by another judge: "In 
the present case I do not think D. 
was acting as agent of either of the 
supposed principals, but, having pos- 
session of the bonds entrusted to him 
by the company, made the manual 
abstraction and tradition of them 
which brought them to the hands of 
an innocent holder." Atlantic Cot- 
ton Mills v. Indian Orchard Mills, 147 
Mass. 268, supra, was distinguished. 

To same effect: Henry v. Allen, 151 
N. Y. 1, 36 L. R. A. 658, 9 Am. St. 
Rep. 698; Allen v. South Boston Ry. 
Co., 150 Mass. 200, 15 Am. St. Rep. 
1S5, 5 L. R. A. 716; Clark v. Marshall, 
62 N. H. 498. 



1407 



1820] 



THE LAW OF AGENCY 



sible, however, in cases in which the agent was the sole actor on both 
sides. 

jgao. In many cases the matter seems to resolve itself 

into the familiar but always difficult question of which of two innocent 
parties should bear the loss. This is often settled by the application of 
the alleged maxim that he should bear it by whose act it was made pos- 
sible. 86 In other cases the only solution seems to be to leave it where 



se This is the ground upon which 
Real Estate Trust Co. v. Washington, 
etc., Ry. Co., 113 C. C. A. 124, 
191 Fed. 566 (reversing Washing- 
ton, etc., Ry. Co. v. Real Es- 
tate Trust Co., 177 Fed. 306) is 
really based. Here the complain- 
ant had left in the possession of 
two of its officers certain uncancelled 
bonds after they had in fact become 
obsolete. One of these officers pledged 
these bonds to the defendant Held, 
that defendant was to be protected. 
The court also says that this Is one 
of the cases in which notice would 
not be imputed. See also, Witten- 
brock v. Parker, 102 Cal. 93, 41 Am. 
St. Rep. 172, 24 L. R. A. 197. 

In Smith v. Boyd, 162 Mo. 146, two 
separate mortgages, both duly re- 
corded, securing notes, were outstand- 
ing upon the same land. The second 
of these had really been given in sub- 
stitution for the first, and with the 
understanding that the first should 
be cancelled and discharged. This, 
however, was not done, but the holder 
transferred the second note and mort- 
gage to ' Smith, falsely assuring him 
that it was a first note and mortgage. 
Smith afterward foreclosed his mort- 
gage and bid in the land, not yet be- 
ing actually apprised of the existence 
of the first mortgage, although it was 
duly recorded. Later proceedings 
were instituted to foreclose the first 
mortgage, and Boyd entered into ne- 
gotiations through one King for the 
purchase of the land at or after the 
foreclosure sale. An abstract was 
procured, which showed the existence 
of the mortgage to Smith and its 
foreclosure, but Boyd was advised 



that the first mortgage, called the 
Tyler mortgage, would take preced- 
ence over the title held by Smith, 
and he entered into a contract with 
King, by which he agreed to take the 
land from King, either upon a deed 
from King or upon the deed made at 
the foreclosure sale, and King bought 
the property at the foreclosure sale 
and had the deed made to Boyd. Boyd 
had no knowledge of the fact that the 
mortgage under which he claimed had 
really been satisfied by the execution 
of the mortgage under which Smith 
claimed and that it should have been 
discharged of record, but King knew 
all these facts. Smith brought 
this action to cancel the convey- 
ance to Boyd, claiming that King 
was Boyd's agent in the purchase, 
and that King's knowledge would 
be imputed to Boyd. * The court 
held that even if King could be 
regarded as Boyd's agent, King'& 
knowledge could not be imputed to 
Boyd, as he was acting adversely. 
The court also held that King was 
not really an agent, but a seller, and 
therefore the ordinary rule imputing 
the agent's knowledge would not be 
implied, and finally also held that in- 
asmuch as Smith had constructive 
knowledge of the existence of the first 
mortgage, from the fact of its being 
recorded, and did nothing for a con- 
siderable period to correct the record, 
and inasmuch as Boyd relied upon 
the record priority of the mortgage 
under which he purchased, Smith 
must bear the loss, even though act- 
ually as innocent as Boyd, upon the 
principle that it was his act or fail- 
ure to act that had made the loss 



1408 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1821 



it has fallen, since there is no reason or justification for shifting it to 
the other party. 87 

1821. In a few cases it has been said that the principal 

could not be held because he really had not participated in the transac- 
tion, that he had at most been a mere unconscious party or a mere 
conduit, and that therefore no responsibility could be attached to him. 88 



possible. In re Marseilles Extens. 
Ry. Co., L. R. 7 Ch. 161, belongs to 
'this class. 

87 in Gunster, Assignee of The 
Scranton Bank v. The Scranton Il- 
luminating, etc., Co., 181 Pa. 327, 59 
Am. St. Rep. 650, one Jessup was vice- 
president of the plaintiff bank, and its 
principal manager, and, in the trans- 
action in question, its sole repre- 
sentative. He was also treasurer of 
the defendant corporation, and as 
such treasurer drew the notes of such 
company to the bank, which the bank 
discounted and gave the defendant 
company credit for the proceeds. Jes- 
sup then, by check of the company, 
drew this fund from the bank and 
appropriated it to his own use. The 
company defends in a suit to collect 
the notes, claiming that the bank 
knew of the fraudulent inception of 
them, because Jessup, its cashier, 
knew of it. But the court refused to 
charge the bank with such knowl- 
edge, and, aftsr discussing that ques- 
tion, says: "But we do not regard 
knowledge as the pivotal point of the 
case. Upon that point both parties 
would stand equal. Both might by 
mere inference be charged with 
knowledge, as the fraud was commit- 
ted by an agent with authority to act 
for both, but in fact neither had or 
in the nature of things could have 
any knowledge at all, and neither 
was under any obligation to presume 
that its agent would be guilty of 
fraud. The real question is, in what 
capacity did Jessup commit the 
fraud? And it is clear that it was as 
treasurer of the appellee. It was as 
treasurer he presented the notes for 
discount, and as treasurer he drew 
the checks for the proceeda Both 



acts were within his authority as 
treasurer and would have been lawful 
if they had been honest, but he drew 
the money on drafts which were the 
property of the company, and when 
he embezzled the money it was the 
money of the company. The bank had 
no part in his act, and gained noth- 
ing by it. The fraud had its incep- 
tion and its consummation in acts 
done in his capacity of treasurer of 
the defendant company, and it should 
bear the loss." 

In Lyndon Mill Co. v. Lyndon Lit- 
erary Institution, 63 Vt. 581, 25 Am. 
St. Rep. 783, the court says that the 
question of imputing notice "depends 
upon the circumstances of each case." 
Innerarity v. Merchants National 
Bank, supra, and Fairfleld Savings 
Bank v. Chase, 72 Me. 226, 39 Am. 
Rep. 319, are cited, but neither is an- 
alogous in its facts. 

ss in Bank of Overton v. Thompson, 
56 C. C. A. 554, 118 Fed. 798, the cash- 
ier of the bank, one Hardinger, and 
the complainant were jointly inter- 
ested in some cattle. The cashier 
sold them and received therefor from 
the buyer a draft and somo credit 
slips. These he deposited with the 
bank to his individual credit, and af- 
terward checked out on his personal 
check the entire amount, using it all 
himself and making no settlement 
with the complainant. In all the 
transactions he was the sole repre- 
sentative of the bank, no other per- 
son connected therewith having any 
knowledge of the complainant's in- 
terest in the funds. The complainant 
seeks to hold the bank as construc- 
tive trustee, alleging that it knew, 
through its cashier, when it received 
the funds, that they belonged to the 



8 9 



1409 



1822] 



THE LAW OF AGENCY 



[BOOK IV 



1822. The true exception. For the reasons that have 

been advanced, it is believed that this second exception, as it is ordi- 
narily stated, is ill-founded and too broad. It rests properly upon the 
ground that, under the circumstances, there was really no agency, and 
not upon the ground that the law presumes that the agent will violate 
his duty. It should be confined, therefore, to the cases which really 
fall within the reason : and notice should be imputed wherever there is 
agency or ratification. 



complainant. The court held that the 
bank could not be so held, but seemed 
to put the case on another ground, 
wherein the question of notice would 
not arise, commenting in the follow- 
ing language: "In the present case, 
Hardinger, for his own purposes, and 
without the knowledge of anyone else 
connected with the defendant bank, 
deposited the proceeds of the sale of 
the cattle, as his own money, in de- 
fendant bank, and, while the facts re- 
mained wholly unknown to anyone 
connected with the bank but himself, 
by his own act he withdrew the same 
money from the bank. As depositor, 
both in making and withdrawing the 
deposit, his interests were adversary 
to the bank. If he was engaged in de- 
frauding the complainant, the pre- 
sumption is that he would not dis- 
close to the bank his fraud, or com- 
plainant's interest in the fund, and 
the evidence of the actual fact corres- 
ponds to this presumption. The bank 
had no knowledge of any interest of 
complainant in the fund, and was un- 
der no obligation to him. The com- 
plainant, by authorizing Hardinger to 
sell the cattle, authorized him to re- 
ceive the money for them and to care 
for it. In caring for it, he placed it 
temporarily in defendant bank, but 
retained, as he properly might, the 
control over it, and afterwards re- 
sumed, as he had a right to, the pos- 
session of it. If it was a trust fund, 
Hardinger was the complainant's 
trustee. He might put it in a bank, 
and remove it at his discretion to an- 
other bank, or put it in his pocket." 
In Brookhouse v. Union Publishing 



Co., 93 N. H. 368, 111 Am. St. Rep. 
623, 2 L. R. A. (N. S.) 993, the facts 
alleged were that one M was the 
guardian of the plaintiff. He was al- 
so the treasurer of the defendant cor- 
poration, and used it for his private 
banking purposes, depositing money 
with its general funds and crediting 
his account, and charging his account 
as he withdrew it. He withdrew from 
his guardian bank account money, for 
which he received drafts payable to 
himself as guardian, or order. These 
he endorsed and directed the assist- 
ant treasurer of defendant to deposit 
to his credit. For his personal pur- 
poses he afterward checked out the 
money. In this action the ward seeks 
to charge the defendant with notice 
of the fraudulent character of the 
transaction. The court held that the 
defendant was an innocent conduit, 
through which the guardian temporar- 
ily passed the money, and that it 
could not be charged therefor. The 
court said: "In the case at bar the 
defendant does not set up any claim 
to the funds in dispute. The funds 
have passed beyond its reach without 
being of any advantage to it." And 
again: "The defendant was not real- 
ly the principal of Moore in respect to 
the deposits and withdrawals of the 
plaintiff's money in and from its bank 
account; it was his agent. The trans- 
actions were solely on his account 
and for his benefit. The defendant re- 
ceived no substantial benefit from 
them. The only authority conferred 
upon Moore by it which he used was 
the authority to use its bank account 
for his private purposes. In drawing 



I4IO 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1823-1825 

1823. It is not enough to prevent the application of the 

general rule that an agent to whom notice comes which would other- 
wise be imputed, shall, however wickedly or fraudulently, fail to com- 
municate it to his principal. An innocent third person, not claiming 
through the agent's act, and otherwise entitled to the benefit of notice, 
can not be denied it merely because the agent, for some fraudulent pur- 
pose of his own, conceals the notice from his principal. The rule can 
only apply where the person claiming the benefit of the notice is a party 
to the transaction or claims through the agent's act, and the agent must 
also have some interest or motive of his own, adverse to his principal's 
interests, which prompts him to conceal his knowledge and which prac- 
tically destroys the agency relation. 89 

1824. Inasmuch as an agent, with the full knowledge 

and consent of his principal, may also act for himself or for the ad- 
verse party, notice acquired by the agent in the course of his agency, 
though while he was also acting for the adverse party with the prin- 
cipal's knowledge and consent, will be imputed to the principal. 90 

1825. Applicability of exception to corporate agents. 

The exception to the general rule applies ordinarily to the agents of 
corporations as well as of natural persons. A doubt, however, has been 
suggested "whether this exception can apply to directors, presidents 
and other such managing officers of a corporation, through whom alone 
the corporation can act ;" 01 but this distinction has not been generally 
approved, 92 and no sound reason is perceived why such a distinction 
should be made. 

A different distinction has also been suggested, namely, that the ex- 
ception in question will not apply where the agent, "though he acts 
for himself or for a third person, is the sole representative of the cor- 

checks, he fulfilled its obligation to principal, but upon the other party, 

himself. He was really acting for does not, it is held, alter the general 

himself." rule. Lockhart v. Washington, etc., 

89 Armstrong v. Ashley, 204 U. S. Min. Co., 16 N. Mex. 223. 

272, 51 L. Ed. 482; Boursot v. Savage, eo pi ne Mt. Iron Co. v. Bailey, 36 

L. R. 2 Eq. 134. Letters which come C. C. A. 229, 94 Fed. 258. 

to the hands of the agent of a bank i Pomeroy's Equity Jurisprudence, 

authorized to receive them must be 675, note. Mr. Pomeroy refers to 

deemed to be received by the bank, Holden v. N. Y. & Erie Bank, 72 

even though the agent suppresses N. Y. 286, and First Nat. Bank v. 

them in order to prevent discovery Town of New Milford, 36 Conn. 93, 

of irregularities of his own. First [cited in 1818, supra]. 

Nat. Bank v. Fourth Nat. Bank of f* 2 See, for example, Brookhouse v. 

Louisville, 6 C. C. A. 183, 56 Fed. 967. Union Publishing Co., 73 N. H. 368, 

The fact that the agent is engaged in 111 Am. St. Rep. 623, 6 Ann. Gas. 675, 

practicing fraud, not upon his own 2 L. R. A. (N. S.) 993. 

1411 



1826] THE LAW OF AGENCY [BOOK IV 

poration in the transaction in question." 93 This distinction, however, 
like the preceding one, seems not to get to the root of the matter. It 
is, of course, true that a corporation can only act through some agent, 
and where it acts through a single agent knowledge must come through 
him if it conies at all. But it seems to beg the question to say that it 
must come at all, and especially to say that it must come in every case 
in which the corporation is represented solely by the agent who had the 
knowledge. Another distinction, though well settled, namely, that 
knowledge will not be imputed where the principal was represented by 
another agent in the transaction in question, 04 seems not to furnish jus- 
tification for the distinction thus suggested. 

The real ground upon which this situation rests is believed to be that 
already stated, namely, that where the agent is the sole representative 
of the corporation, the corporation can not claim anything except 



through him and that therefore if it claims through him, after notice 
of the facts, it must accept his agency with its attendant notice. 

1826. The third exception Collusion of party claiming benefit 
of notice. The rule which imputes to the principal the knowledge 
of his agent is, as has been seen, commonly based upon the legal pre- 
sumption that the agent has done his duty by communicating it to his 
principal, a presumption which, it is said, is demanded by a sound 
public policy for the protection of those who deal with the agent. Ob- 
viously no policy requires that such a presumption shall be made for 
the protection of a person who has conspired with the agent to defraud 
the principal and who now seeks the benefit of a presumption that a 
duty has been performed which he himself was interested in having 
violated. Thus in a leading case in New York, where this question 
was involved, the court said: "If a person colludes with an agent to 
cheat the principal, the latter is not responsible for the acts or knowl- 
edge of the agent. The rule which charges the principal with what the 
agent knows is for the protection of innocent third persons, and not 
those who use the agent to further their own frauds upon the princi- 
pal." 95 

s This distinction is worked out s National Life Ins. Co. v. Minch, 

with much care and fullness of cita- 53 N. Y. 144. See also, to same ef- 

tions in a note by the editors, ap- feet: Morrill v. Bosley, 40 Tex. Civ. 

pended to the case of Brookhouse v. App. 7; Elliott v. Maccabees, 46 

Union Publishing Co., in 2 L. R. A. Wash. 320, 13 L. R. A. (N. S.) 856; 

(N. S.) 993, supra. It is also ap- Traders, etc., Bank v. Black, 108 Va. 

proved in the late case of Cook v. 59; Van Buren County v. American 

American Tubing & Webbing Co., 28 Surety Co., 137 Iowa, 490, 126 Am. St. 

R. I. 41, 9 L. R. A. (N. S.) 193. Rep. 290; Hickman v. Green, 123 Mo. 

*See post, 1837. 165, 29 L. R. A. 39; Cooper v. Ford, 

1412 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1827, 1828 

The identification theory would reach a similar result here upon the 
ground that the collusion destroyed the agency and with it the founda- 
tion for identification. 

1827. Who can avail himself of the notice. The rule respecting 
the imputation of notice is usually resorted to by third persons seeking 
a remedy against the principal. Ordinarily they are persons who have 
dealt with the principal through the agent in question ; but it is not es- 
sential that they shall have dealt with the agent. The rule respecting 
notice may apply although they have not known of or dealt with the 
agent, if they have had dealings with the principal, or with some other 
agent of his, which make the matter of notice material to the protection 
of their interests. 90 As has been seen, however, they will not be permit- 
ted to avail themselves of the rule, where they were colluding with the 
agent to defraud the principal. 97 

As has already been stated, it has been held that the principal him- 
self, in his dealings with third persons, may avail himself of the rule, 
although the agent has not in fact communicated his knowledge to 
him. 98 

The agent himself, however, in his relations to his principal, could 
rarely, if ever, be permitted to set up, as constructive notice to his prin- 
cipal, information which, in disregard of his duty, he had failed to com- 
municate to the principal. 99 

1828. What notice includes Actual and constructive notice. 
The notice which will affect the principal may be the direct and un- 
equivocal information of the fact, or it may, in certain cases, be infer- 
red from the existence of other facts. The former is sometimes termed 
actual notice, and the latter constructive notice. The distinction, how- 
ever, is not of any great practical importance, and perhaps, strictly, the 
latter is to be deemed as much actual notice as the former. In either 
event, it is well settled that the principal may ordinarily be bound by 

29 Tex. Civ. App. 253; Benedict v. same principle. Ga. Civ. Code, 3028. 

Arnoux, 154 N. Y. 715; Brooklyn Dis- Socute des Mines v. Mackintosh, 5 

tilling Co. v. Standard Distilling & Utah, 568. 

Distributing Co., 120 N. Y. App. Div. Armstrong v. Ashley, 204 U. S. 

237; Traber v. Hicks, 131 Mo. 180; 272, 51 L. Ed. 482. 

Cowan v. Curran, 216 111. 598; Ham- ST See ante, 1826. 

burg-Bremen Ins. Co. v. Lewis, 4 App. See ante, 1813. Haines v. 

D. C. 66; Western Mfg. Co. v. Ganzer, Starkey, 82 Minn. 230; Harrison v. 

11 C. C. A. 371, 63 Fed. 647; Hudson Legore, 109 Iowa, 618. 

v. Randolph, 13 C. C. A. 402, 66 Fed. See McDermott v. Hayes, 116 C. 

216. C. A. 553, 197 Fed. 129; Sankey v. 

The Georgia Civil Code declares the Alexander, Ir. Rep. 9 Eq. 259. 

1413 



1829] 



THE LAW OF AGENCY 



[BOOK IV 



the one as fully as by the other. 1 The rule as to what will constitute 
constructive notice may be said to be that wherever a party has knowl- 
edge of any fact sufficient to put a prudent man upon an inquiry which, 
if prosecuted with ordinary diligence, would lead to actual notice, he 
will be charged with the knowledge which might have been acquired 
by such diligence. 2 The presumption that he would have acquired such 
knowledge is not, however, indisputable, and it is always open to the 
party to show that he used such diligence without avail. 8 

Within this rule constructive notice to the agent which would, if fol- 
lowed with reasonable diligence, have led to further information, would 
doubtless charge the principal with notice of the information which 
might have been so obtained.* 

1829. Whether the principal can be charged with con- 
structive notice by reason of what the agent knew, but which would 
not be constructive notice to the agent, would seem to be doubtful. 5 
If, for example, information comes to an agent which reasonably seems 
to him immaterial, but which, if he had known what the principal knew, 
would have led to material information, can it be said that the princi- 
pal is chargeable with the latter information? If he had acted in per- 



1 But constructive notice alone will 
not suffice where actual knowledge is 
required, e. g., in conspiracy, etc., 
Benton v. Minneapolis Tailoring Co., 
73 Minn. 498; Reisan v. Mott, 42 
Minn. 49, 18 Am. St. Rep. 489. 

2 Williamson v. Brown, 15 N. Y. 
354; Baker v. Bliss, 39 id. 70; Cam- 
bridge Valley Bank v. Delano, 48 id. 
326; Hood v. Fahnestock, 1 Pa. 470, 
44 Am. Dec. 147; Chapman v. Glas- 
sell, 13 Ala. 50, 48 Am. Dec. 41. The 
mere fact that there was opportunity 
to learn where there was nothing to 
suggest any necessity or occasion to 
know, is not enough. Economy Sav. 
Bank v. Gordon, 90 Md. 486, 48 L. R. 
A. 63. 

s Williamson v. Brown, 15 N. Y. 354. 

* Furry v. Ferguson, 105 Iowa, 231; 
Field v. Campbell, 164 Ind. 389, 108 
Am. St. Rep. 301; Wiley v. Knight, 
27 Ala. 336; Pepper v. George, 51 Ala. 
190; Gallagher v. Equitable Gas L. 
Co., 141 Cal. 699; Wells v. McMahon, 
3 Wash. Ter. 532. 

Where the agent owes a duty to 



investigate, as in the case of an 
agent charged with the master's duty 
to keep premises, etc., in repair, what 
he would have learned is imputable. 
Johnson v. First Nat. Bank, 79 Wis. 
414, 24 Am. St. Rep. 722. 

5 In Wittenbrock v. Parker, 102 Cal. 
93, 41 Am. St. Rep. 172, 24 L. R. A. 
197, where T and H were lawyers 
and partners, and T while acting for 
one client acquired certain informa- 
tion, it was held that this would not 
be imputed to Y, a client who sub- 
sequently acted with H respecting the 
same property, both Y and H being 
actually ignorant of what T knew. 
The court said that while, for the 
purposes of his liability as a member 
of the firm of T and H, H might be 
charged with constructive notice of 
what his partner T knew, Y, the 
client of H, was not to be charged 
with constructive knowledge of the 
same matter of which for some pur- 
poses H had thus constructive but not 
actual knowledge. 



1414 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1830, 183! 

son he would be chargeable. But if the duty of the agent to communi- 
cate is limited to the communication of that which, from his standpoint, 
reasonably seems material to the principal's interests as must cer- 
tainly be the case if the duty is considered from the standpoint of the 
principal and the agent and if the obligation of the principal depends 
upon the presumption that the agent has performed his duty, the knowl- 
edge imputed to the principal could not include the information in ques- 
tion. The same result would seem to flow from the theory of the legal 
identity of the principal and agent, unless we are prepared to say that 
that theory leads to the conclusion that the principal knows what the 
agent knows, and is therefore bound by the results of an investigation 
which the knowledge of two facts would have prompted, although as a 
matter of fact he is actually ignorant of one of them. 

1830. Agent must be agent of person to whom notice is to be 
imputed. It would seem to go without saying that notice can not 
be imputed under the rules here being considered unless the agent who 
had the notice or knowledge stood in that relation to the person to 
whom the notice is sought to be imputed. If he was the agent of the 
other party only, or only of some one else than the alleged principal, his 
notice or knowledge cannot be imputed to the person in question. 8 

1831. Rule applies only to notice respecting matters within 
agent's authority. This rule which imputes to the principal the 
knowledge possessed or notice received by the agent applies only to 
cases where the knowledge is possessed or notice received by an agent 
within the scope of whose authority the subject-matter lies. An agent, 
may be put forward for the express purpose of receiving notice, or be 
referred to as the one to whom notice may be given, and in such a case, 
of course, no further evidence of authority to receive it would be re- 
quired. 7 An agent may also be put in such a position of general 
authority, in such a managerial or directing situation, as in the 
case of the chief officer of a corporation or of an individual, that 
notice to him will be notice to his principal because it must be 
deemed within his authority to receive it, even though he never 
personally acts in respect of the matters to which the notice re- 
lates. 8 But^ in other cases,_notice binds the principal because the 

See Goodwynne v. Bellerby, 116 * See Hardin Grain Co. v. Chicago, 

Ga. 901; International Building & L. etc., Ry. Co., 134 Mo. App. 681. 

Ass'n v. Watson, 158 Ind. 508; s gee Cragie v. Hadley, 99 N. Y. 

Weightman v. Washington Critic Co., 131, 52 Am. Rep. 9 (the president of 

4 App. Gas. D. C. 136 (mere rela- a bank); New Hope Bridge Co. v. 

tion of husband and wife not Phenix Bank, 3 N. Y. 156 (same); 

enough). Mihills Mfg. Co. v. Camp, 49 Wis. 

1415 



[BOOK iv 



receipt of it can be deemed to be an incident to the act which the 
agent is authorized to perform, and it can not be notice unless 
it is such an incident. In other words, the knowledge or notice 
must come to an agent who has authority~~to deal in reference to 
those matters which the knowledge or notice affects, and whose 
duty_it therefore is to communicate it to his principal. The fact 
that some other agent, employed in reference to different and distinct 
transacti6ns, may have had notice or knowledge will not affect the 
princ ipul. ''^X*' 
130; Port Jervis v. First National the latter is employed, unless the 



Bank, 96 N. Y. 550 (president 
and executive head of bank); Lea 
v. Iron Belt Co., 147 Ala. 421, 119 
Am. St. Rep. 93, 8 L. R. A. (N. S.) 
279 (president and chief executive). 

But the divisions of function be- 
tween the officers of a corporation 
may be so narrow that notice to a 
president, for example, of some mat- 
ter within another officer's sphere, 
will not be notice to the corporation. 
Bank v. Craig, 6 Leigh (Va.), 399. 

Congar v. Chicago, etc., Ry. Co., 
24 Wis. 157, 1 Am. Rep. 164; Stewart 
v. Sonneborn, 49 Ala. 178; Cook v. 
Anamosa, 66 Iowa, 427; Russell v. 
Cedar Rapids Ins. Co., 78 Iowa, 216, 
4 L. R. A. 538; Tate v. Hyslop, 15 
Q. B. Div. 368; Columbia Paper 
Stock Co. v. Fidelity & Casualty 
Co., 104 Mo. App. 157; Trentor 
v. Pothen, 46 Minn. 298, 24 Am. St. 
Rep. 225; Strauch v. May, 80 Minn. 
343; Comey v. Harris, 133 N. Y. 
App. Div. 686; Johnson v. Valido 
Marble Co., 64 Vt. 337; Walker v. 
Hannibal, etc., R. Co., 121 Mo. 575, 
42 Am. St. Rep. 547, 24 L. R. A. 363; 
Missouri, etc., Ry. Co. v. Belcher, 88 
Tex. 549; Topliff v. Shadwell, 68 Kan. 
317; Fidelity Trust Co. v. Baker, 60 
N. J. Eq. 170; Foote v. Getting, 195 
Mass. 55, 15 L. R. A. (N. SO 693. 

In Warren v. Dixon, 74 N. H. 355, 
the court, commenting on the gen- 
eral rule, said: "That rule does not 
charge the principal with his agent's 
knowledge of facts affecting the sub- 
ject matter of the business in which 



agent, in fact, acts for the principal 
in what he does in the matter in re- 
spect to which it is sought to charge 
the principal with his knowledge. 
Henry v. Allen, 151 N. Y. 1, 10, 36 
L. R. A. 658. In other words, the 
principal is not charged with his 
agent's knowledge in respect to a 
particular transaction, unless the lat- 
ter's acts in respect to it were with- 
in the scope of his employment. To 
illustrate: If a person employs an 
agent to buy property and the latter, 
instead of buying, sells to the princi- 
pal property procured from a stranger 
by fraud, the agent's knowledge of 
that fraud will not be imputed to the 
principal (Allen v. Railroad, 150 
Mass. 200, 206, 5 L. R. A. 716, 15 Am. 
St. Rep. 185); but, if the agent buys 
property for the principal, the latter 
will be charged with the agent's 
knowledge of any defects in the grant- 
or's title (Hovey v. Blanchard, 13 N. 
H. 145, 149). The test, therefore, to 
determine whether an agent's knowl- 
edge is to be imputed to his princi- 
pal is to inquire whether or not the 
agent was acting for the principal 
when he did that in respect to which' 
it is sought to charge the principal 
with his knowledge. Clark v. Marsh- 
all, 62 N. H. 498, 500; Brookhouse v. 
Company, 73 N. H. 368, 374, 111 Am. 
St. Rep. 623, 6 Ann. Cas. 675, 2 L. 
R. A. (N. S.) 993; Gunster v. Com- 
pany, 181 Pa. 327, 59 Am. St. Rep. 
650, 658, note; Akers v. Rowan, 36 
S. C. 87, 10 L. R. A. 705, 706, note." 



1416 



CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1831 



"This," says Dixon, C. J., "seems very clear when we consider 
the reason and ground upon which this doctrine of constructive 



Where the principal had undertak- 
en through an agent to effect insur- 
ance on an overdue ship, and failed, 
that agent knowing the ship was lost 
but not communicating the fact to 
any one, insurance effected by the 
principal through another agent will 
not be avoided on the ground that the 
first agent's knowledge was the 
knowledge of the principal. Black- 
burn Low & Co. v. Vigors, 12 App. 
Cases, 531. 

In the following cases notice was 
not imputed because the matter to 
which the knowledge related was not 
within the agent's authority. King 
v. Rowlett, 120 Mo. App. 120 (an ac- 
tion for buying corn grown, on plain- 
tiff's land, where defendant's serv- 
ant, hired to weigh and receive the 
corn, knew where it was grown); 
Cook v. Anamosa, 66 Iowa, 427 (ac- 
tion against a city, where the mar- 
shal had notice of the defects in the 
sidewalk, but no authority to repair 
it); Arrington v. Arrington, 114 N. 
C. 151 (where an attorney, employed 
to examine title, knew from other 
sources facts affecting title); Trentor 
v. Pothen, 46 Minn. 298, 24 Am. St. 
Rep. 225 (same effect); (but see Al- 
lison v. Falconer, 75 Ark. 343, where 
notice was imputed in the case of an 
attorney to examine title and procure 
the execution of the proper papers to 
effect the conveyance); Hickman v. 
-7 Green, 123 Mo. 165, 29 L. R. A. 39 
(where a real estate firm hired "to 
effect an exchange," but not to ex- 
amine title, knew of an unrecorded 
deed); Mackay-Nisbet Co. v. Kuhl- 
man, 119 111. App. 144 (action for 
goods sold, where, in a social con- 
versation before the sale, defendant 
told plaintiff's salesman, employed in 
another territory, that he had sold 
the business); Collins & Toole v. 
Crews (Ga.), 59 S. E. 727 (a similar 
case involving notice of bankruptcy) ; 
German Ins. Co. v. Goodfrlend, 97 



S. W. 1098 (Ky.) (notice to a clerk 
in plaintiff's store that an insurance 
company would not renew plaintiff's 
policy) ; McCalmont v. Lanning, 154 
Fed. 353 (where a bank president 
knew from his official position in an- 
other corporation, of the fraudulent 
inception of a note, purchased by an- 
other officer without the president's 
knowledge) ; Stringfellow v. Brasel- 
ton, 54 Tex. Civ. App. 1 (where a 
notary, the grantee's agent to obtain 
the signatures in a deed, knew of cir- 
cumstances of a wife's joining in her 
husband's deeds) ; Lowden v. Wilson, 
233 111. 340 (where an agent entrusted 
with a check to be handed over when 
delivery of possession of property was 
made knew of an adverse claim); 
Tennent v. Union Life Ins. Co., 133 
Mo. App. 345 (where a husband au- 
thorized by his wife to pledge Iris in- 
surance policy of which his wife was 
beneficiary, knew that the company 
subsequently made an irregular sale 
of the policy) ; Pennoyer v. Willis, 
26 Ore. 1, 46 Am. St. Rep. 594 (where 
an agent to care for but not invest 
funds knew of a defect in a security 
offered for a loan of the funds); 
Strauch v. May, 80 Minn. 343 (where 
a "cashier" to pay as the principal or- 
dered had notice of an assignment of 
wages); Atchison, etc., R. R. Co. v. 
Benton, 42 Kan. 698 (where, before 
action was brought, a general at- 
torney of a railroad company had 
notice of matters connected with its 
land department); Day v. Exchange 
Bank, 117 Ky. 357 (deceit for mis- 
representations in a sale of bank 
stock, where the question was on the 
running of the statute of limitations 
from time of plaintiff's purchase, 
plaintiff's agent appeared to have had 
notice in subsequent sales of the 
stock to third persons or in other 
transactions); Davis v. Steeps, 87 
Wis. 472, 41 Am. St. Rep. 51, 23 L. R. 
A. 818 (where the vendor of land, 



1417 



1832] 



THE LAW OF AGENCY 



[BOOK iv 



notice rests. The principal is chargeable with the knowledge of 
his agent because the agent is substituted in his place and represents 
him in the particular transaction ; and it would seem to be an obvious 
perversion of the doctrine, and lead to most injurious results, if, in the 
same transaction, the principal were likewise to be charged with the 
knowledge of other agents, not engaged in it and to whom he had del- 
egated no authority with respect to it, but who were employed by him 
in other and wholly different departments of his business." 10 Whether 
the rule be based upon the ground specified by the learned judge, or 
upon the duty of the agent to communicate, the result is the same, 
no duty of communication would rest upon an agent where, from the 
nature of the acts to be performed by him, the knowledge or notice 
would appear to have no relation to or connection with those acts. 

1832. Notice after termination of authority does not bind. It 
follows as a necessary conclusion from the principles considered that 
notice to an agent, after his authority has entirely ceased, or after his 
authority to represent the principal in respect to the matters to which 
the notice relates has terminated, is not ordinarily notice to the princi- 
pal. 11 Under neither of the theories discussed could such notice be 
imputed to the principal. 



who, though not the vendee's agent 
for any purpose concerning the con- 
veyance, furnished the abstract of 
title, had notice of a judgment lien); 
Boy.d v. Boyd, 128 Iowa, 699, 111 Am. 
St. Rep. 215 (a similar case, where 
the knowledge of the mortgagor's 
agent who prepared the abstract was 
not imputed to the mortgagee) ; Labbe 
v. Corbett, 69 Tex. 503 (where, under 
a contract to deliver sheep, diseased 
animals' were delivered, and vendee's 
servants to assist in driving and car- 
ing for the sheep knew this); Storms 
v. Mundy, 46 Tex. Civ. App. 88 (where 
an agent to see if he could obtain an 
increase in the price of land, but not 
to negotiate or make the sale, ap- 
peared to have notice of fraud con- 
nected with the sale); Lewis v. 
Equitable Mortgage Co., 94 Ga. 572 
(knowledge of an equity in land by 
an agent to inspect merely); Hock- 
field v. Southern Ry. Co., 150 N. C. 419, 
134 Am. St. Rep. 945 (where notice 
of arrival of goods was given to a 
transfer company in the habit of haul- 



ing goods for consignee, but not told 
to haul the goods in question); but 
see, Rothchild v. Northern Pac. Ry. 
Co., 68 Wash. 527, 40 L. R. A. (N. S.) 
773 (where the transfer company was 
employed to receive the goods, and 
notice was imputed). See also, 
Mims v. Brooks, 3 Ga. App. 247. 

10 In Congar v. Chicago, etc., Ry. Co., 
24 Wis. 157, 1 Am. Rep. 164, cited, 
supra. 

nBoardman v. Taylor, 66 Ga. 638; 
Great Western Ry. v. Wheeler, 20 
Mich. 419; Irvine v. Grady, 85 Tex. 
120; Traber v. Hicks, 131 Mo. 180; 
First Nat. Bank of Emmetsburg v. 
Gunhus, 133 Iowa, 409, 9 L. R. A. (N. 
S.) 471. 

Notice to former agent of a corpora- 
tion is not notice to the corporation 
after the agent has severed his con- 
nection with it. Great Western Ry. v. 
Wheeler, supra. 

So notice to an agent while nego- 
tiating for the purchase of some cat- 
tle is not notice to his principal, 
where the agent's negotiations were 



1418 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1833, 1834 



The case of an agent accredited to receive notice and whose author- 
ity had been terminated without the knowledge of the other party 
would, of course, stand on different ground. 

1833. Notice must be of some material matter. The 

knowledge or notice which is to bind the principal must under the the- 
ory of a duty to disclose, at least, be of some matter so material to the 
transaction as to make it the agent's duty to communicate it to the prin- 
cipal, 12 and, doubtless, the identification theory would not lead to prac- 
tically different result. It must also come from such an apparently au- 
thentic and reliable source that an ordinarily prudent man would be 
required to give heed to it. But neither the principal nor the agent is 
bound to regard that which appears to be mere idle and baseless rumor 
or report. 13 ' ^ o 

1834. Notice must come to someone who is an agent. In' or- 
der to bind the principal, the notice must come to someone who stands 
in the attitude of an agent to him that is to say, someone 'Who repre- 
sents him, who owes him some duty, to whom the principal looks for 
protection of his interests in the field in question. 14 Thus notice to an 



broken off and the purchase subse- 
quently consummated by the princi- 
pal in person. Irvine v. Grady, supra. 

Nor does the fact that the cashier 
of the plaintiff bank had at one time 
been a stockholder in and the presi- 
dent of the defendant bank, and his 
successor had never been elected, 
charge the plaintiff with knowledge 
of the character of a transaction car- 
ried on by defendant's cashier. First 
Nat. Bank v. Gunhus, supra. 

Notice to attorneys after termina- 
tion of relation does not bind former 
client. Chicago Sugar Ref. Co. v. 
Jackson Brew. Co. (Tenn. Ch.) 48 S. 
W. 275; Beck v. Avondino, 20 Tex. 
Civ. App. 330; Pedlar v. Stroud, 116 
Cal. 461. 

12 Fairfield Savings Bank v. Chase, 
72 Me. 226, 39 Am. Rep. 319. 

is Thus in Stanley v. Schwalby, 162 
U. S. 255, it is said, p. 276, 40 L. Ed. 
960: "In order to charge a purchaser 
with notice of a prior unrecorded con- 
veyance, he or his agent must either 
have knowledge of the conveyance, 
or, at least, of such circumstances as 
would, by the exercise of ordinary 



diligence and judgment, lead to that 
knowledge; and vague rumor or sus- 
picion is not a sufficient foundation 
upon which to charge a purchaser 
with knowledge of a title in a third 
person." 

See also Kerns v. Swape, 2 Watts 
(Pa.) 75; Mulliken v. Graham, 72 Pa. 
484; Jaques v. Weeks, 7 Watts (Pa.), 
261; Pittman v. Sofley, 64 111. 155; 
Vance v. Hickman, 95 111. App. 554. 

14 See, for example: Booker v. 
Booker, 208 111. 529, 100 Am. St. Rep. 
250; Jummel v. Mann, 80 111. App. 
288; Doyle v. Teas, 4 Scammon 
(111.), 202; Aetna Indemnity Co. v. 
Schroeder, 12 N. D. 110; Columbia 
Paper Stock Co. v. Fidelity & Casu- 
alty Co. (Mo. App.), 78 S. W. 320; 
Central Coal Co. v. George S. Good & 
C6., 120 Fed. 793, 57 C. C. A. 161; 
Wyllie v. Pollen, 3 De Gex, J. & S., 
596, 601. 

The circumstances of a mortgagor 
being a solicitor, and preparing the 
mortgage deed, and of the mortgagee 
employing no other solicitor, are not 
sufficient to constitute the former the 
solicitor of the -latter, so as to affect 



1419 



1834] 



THE 



AGENCY 



[BOOK iv 



independent contractor, a mere bailee, a carrier, a postman, and the 
like, would not ordinarily be imputed. It is sometimes said that notice 
to a mere messenger or to one acting merely in a ministerial capacity 
would not be imputed. If the theory upon which notice is to be im- 
puted be the legal identity of the principal with the agent, then the per- 
son to whom the notice comes must be such a person and acting in 
such a capacity that it may fairly be said that, for the time being, he 
is the principal. If the true theory be that the agent owes a duty to 
communicate, then the person to whom the notice comes must be such 
a one and acting in such a capacity that it may fairly be said that 
the principal looks to him for information concerning the subject-mat- 
ter ; that he is the person to whom information is likely to come, and 
whose duty it would be to communicate it. Such a rule would seem 
to exclude all persons having merely such a casual, temporary, me- 
chanical, non-discretionary relation to the subject-matter that they 
owe no duty to heed or report the information. 16 

him with notice of an incumbrance chase, it was held that the vendor in 

obtaining and making over the quit 
claim did not stand as an agent of 
the vendee so as to charge vendee 
with notice of an outstanding unre- 
corded deed. Riley v. Robinson, 128 
App. Div. 178, affirmed without opin- 
ion in 202 N. Y. 531. 

is In Royle Min. Co. v. Fidelity 
etc., Co., 161 Mo. App. 185, it is said 
that the rule imputing notice does not 
apply "where the agent is acting in a 
merely ministerial capacity. When 
so acting, the agent does not act a$ a 
substitute for the principal, nor is 
there imposed upon the agent the 
duty of communicating to his princi- 
pal the knowledge thus acquired." 
To the same effect are: Labbe v. Cor- 
bett, 69 Tex. 503; Storms v. Mundy, 
46 Tex. Civ. App. 88. 

But see Conrad v. Graham, 54 
Wash. 641, 132 Am. St. Rep. 1137, 
where notice to a "messenger" sent 
out to buy a certain article was held 
to be notice to the employer. 

In Edson & Foulke Co. v. Winsell, 
160 Cal. 783, where notice to a ditch 
tender of the third person's adverse 
claim was held to bind the principal. 
"It matters not how lowly may be the 
position of the agent or servant of a 



known to the solicitor. Espin v. 
Pemberton, 3 De G. & J. 547. Notice 
to a sub-contractor is not notice to 
the contractor. Coal & Coke Co. v. 
Good & Co., supra. One employed as 
a messenger and not a negotiator is 
not an agent within the rule. Doyle 
v. Teas, supra; Booker v. Booker, 
supra. 

Where a surety company requests 
one agent of a concern to inform an- 
other that a bond is required from 
the latter and he does so, this does 
not make the first agent an agent in 
procuring the bond so that knowledge 
which he may have had of the other's 
conduct was imputable. Aetna In- 
demnity Co. v. Schroeder, supra. 

A trustee under a deed of trust is 
not the agent of the holder of securi- 
ties. Jummel v. Mann, 80 111. App. 
288. Notice to an officer employed to 
make an attachment is notice to the 
plaintiff. But notice to the plaintiff's 
of a tax title required the vendor to 
provide a quit claim deed from the 
last regular owner of record before 
the vendee would complete the pur- 
tachment, would not be. Tucker v. 
Tilton, 55 N. H. 223. Where a vendee 
attorney, who sued out the writ of at- 



1420 



CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1835-1837 

1835. Ratification. Although the one who acted may 

not have been an agent, or an agent for the act in question, at the 
time the act was done, responsibility for the act with the notice af- 
fecting it may be assumed by ratification with full knowledge of the 
facts. But knowledge of the facts to which the notice relates would 
usually be deemed as material and essential to be known as any others, 
and, notwithstanding an occasional utterance to the contrary, the rules 
of ratification can be based only upon actual knowledge and not merely 
upon imputed knowledge. 16 

It must be kept in mind, however, that the result of an alleged rati- 
fication without knowledge is that the whole act fails, and not that it 
can be affirmed as to all the beneficial parts and rejected as to the 
burden of the notice. 17 

It is also to be observed that, though one may not have had knowl- 
edge at the outset, to insist upon retaining or enforcing the benefits, 
after knowledge of the means by which they were obtained, must also 
often count as a ratification with knowledge. 

1836. Releasing agent from duty Enlarging it. In seeking for 
a duty to communicate, reference must ordinarily be had to the duty 
which the law would impose. It surely cannot be true that the prin- 
cipal can save himself from the effects of notice by attempting to ex- 
onerate the agent from a duty to communicate it, whatever might be 
the effect of such exoneration between the principal and the agent 
themselves. On the other hand, it is doubtless true that the princi- 
pal's obligations might be enlarged by his expressly imposing a duty 
or authority to receive notice greater than that which the law would 
otherwise imply. 

1837. Agent of two principals. Where the same person acts 
with their consent, as agent of two or more principals, all interested in 
the same subject-matter, and concerning which he owes a duty of com- 
munication to each, notice to this agent must doubtless be deemed no- 
tice to all his principals in accordance with the ordinary rules. 18 

company or corporation; If, within the text (though not always made 

the limits of his assigned duty, he clear in the opinions), that cases like 

has notice, or is charged with notice the following are to be upheld: 

of a particular matter or thing, apper- Haas v. Sterabach, 156 111. 44; Rus- 

taining to that duty, that notice is no- sell v. Peavy, 131 Ala. 563; Singleton 

tice to his principal." v. Bank of Monticello, 113 Ga. 527; 

ie Thomson v. Central Pass. Ry. Backman v. Wright, 27 Vt. 187, 65 

Co., 80 N. J. L. 328; Bohanon v. Bos- Am. Dec. 187. 
ton & Me. R. Co., 70 N. H. 526. " See Sullivan Co. R. Co', v. Con- 

" It is, of course, upon this ground necticut Riv. Lum. Co., 76 Conn. 464; 

and that of the following clause in Consolidated Ice Mach. Co. v. Keifer, 

1421 



i8 3 8] 



l THE LAW OF AGENCY 



[BOOK iv 



Where, however, the same person happens to be agent of two princi- 
pals not thus interested, notice to him will not necessarily be notice 
to both principals. To make it so there must be some duty imposed 
upon him to communicate it to the principal sought to be affected. 19 

1838. Where an agent stands in such a relation to two 

principals (who have not knowingly consented to his double employ- 
ment) that his present duty to one conflicts with his present duty to 
the other, it is said that notice which he has with reference to the busi- 
ness of one principal will not be imputed to the other. 20 



134 111. 481, 23 Am. St R. 688; Holden 
v. New York, 'etc., Bank/72 N. Y. 286; 
Berry v. Rood, 168 Mo. 316; Gale v. 
Lewis, 9 Q. B. 730. 

19 Where one person is an officer of 
two companies, it was held In re 
"Hampshire Laiid Co., [18961 2 Ch. 
.Div. 743, that knowledge which he 
has acquired as officer of one .com- 
pany will not be imputed to the other 
company unless he has some duty im- 
posed upon him to communicate his 
knowledge to the company sought to 
be affected by the notice, and some 
duty imposed upon him by that com- 
pany to receive the notice. 

.. This holding was followed In In re 
Fenwick, [1902] 1 Ch., 507; In re 
David Payne & Co., [1904] 2 Ch. 608; 
"where two companies have the same 
person as director, and enter into 
dealings with each other, the knowl- 
edge of the common director cannot 
He attributed to either company in a 
transaction In which he did not rep- 
resent it." Martin v. South Salem 
Land Co., 94 Va. 28; Benton v, Ger- 
man Am. Nat. Bank, 122 Mo. 332. 

Where there is a common agent 
whose duty It would be on one side 
to give and on the other to receive 
notice, notice to him will be imputed. 
Mason v. United Press, 94 N. Y. App. 
Div. 617. 

20 In Constant v. The University of 
Rochester, 111 N. Y. 604, 7 Am. St. 
Rep. 769, 2 L. R. A. 734, an agent act- 
ing for Constant had taken a mort- 
gage for-him which it was the agent's 
duty to promptly put upon record. 
Instead of recording this mortgage. 



' 

however, he left it In his safe, 
through what was claimed to be an 
oversight. Some months later, but 
while this mortgage was still in his 
safe, and while he owed a constant 
and present duty to have it recorded, 
he acted for the university in taking 
another mortgage, supposed by the 
university to be a first mortgage upon 
the same premises. This second mort- 
gage was also left with the agent to 
be recorded, and it was recorded. For 
a short period, therefore, the agent 
had in his hands two unrecorded 
mortgages and owed to each princi- 
pal the duty to record his first so as 
to secure priority. It was urged that 
the notice which the agent had of the 
first mortgage, though unrecorded, 
should be imputed to the university 
and that therefore its mortgage was 
subordinate to the first one. But the 
court said that it could not be im- 
puted, though it was not necessary to 
decide it. 

Compare Rolland v. Hart, L. R. 6 
Ch. 678, where a solicitor induced a 
client to loan money upon a mortgage 
on certain lands and soon afterward 
induced another client to do the 
same without advising him of the 
first. The second mortgage was first 
recorded. Held, subject to the first. 
The solicitor does not appear to have 
expressly undertaken to record .either 
mortgage. 

In Pursley v. Stahley, 122 Ga. 362, 
A, an illiterate person, owed X, who 
had been her attorney, $50. At his 
request and to enable him to get the 
money,. A consented to give a note 



1422 



CHAP. V] ' LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1839, 

If, however, anything more is meant by- this than one of the excep- 
tions already considered, it is believed to be unfounded and not to be 
approved. 

1839. Where such an agent attempts dealings between 

his two principals (both not having consented thereto) either may, in 
accordance with well settled rules, repudiate the dealings. If, however, 
either one, instead of repudiating, elects to affirm the transaction and 
seeks to acquire or retain a benefit from it after knowledge of the facts, 
he must take the benefit subject to the means by which it was acquired. 
This is frequently exemplified in the cases already cited in which such 
an agent, for his own purposes, abstracts from one principal and at- 
tempts to convey to the other neither one being represented by any 
other agent : if the latter principal claims the benefit of the act he must 
take it subject to his agent's knowledge. If A, being the agent of X 
and also of Y, and being indebted to Y, abstracts bonds from X and 
receives them for Y as security for that debt, then, though when he 
attempts to transfer them he may be acting as agent for X, yet when 
he attempts to receive them and acquire title to them he is acting as 
agent for Y. Y did not act in person, no one else than A acted for 
him, if Y has obtained any title he obtained it through A, and he must 
be charged with the knowledge his agent had at the time. 

1840. Two agents of same principal. Where two or more per- 
sons are jointly acting as agents for one principal, with reference to 
the same subject-matter, notice to any one of them would be ordinarily 
deemed notice to the principal within the rules already considered. 21 

for that amount. X fraudulently held that this would not be imputed 
made the note for $500 and A signed to client Y, who subsequently acted 
ft. The note was made payable to B, with B respecting the same subject 
who had money to lend and who was matter, B having actually no notice 
also a client of X. The latter ob- of what A knew. In Phoenix Ins. Co. . 
tained the money on the note from B v. Flemming, 65 Ark. 54, 39 L. R. A. 
and kept it. Held, that B was not 789, 67 Am. St. R. 900, where two 
chargeable with notice of the fraud partners were insurance agents and 
of X. The court said that X was one of them issued a policy contain- 
really not the agent of either A or B, ing a provision against the keeping 
but, if he were agent, he was as much of fire-works, the fact that the other 
the agent of A as of B. partner later happened to purchase 
21 Bank of United States v. Davis, fire works for his own individual use 
2 Hill (N. Y.), 451; Brown v. at the store does not charge the com- 
Oattis, 55 Ga. 416. In Witten- pany with notice, where he never 
brock v. Parker, 102 Cal. 93, 41 acted with reference to this insnr- 
Am. St. Rep. 172, 24 L. R. A. ance, or knew that this policy had 
197, where A and. B were lawyers and been issued. 

partners, and A acting for client X Suretyship Imputing knowledge 

acquired certain knowledge, it was l>y one agent of default of another 

1423 



1841] 



THE LAW OF AGENCY 



[BOOK iv 



But where the agents are several, and only one acts, the knowledge of 
the others who did not act would not ordinarily be imputed. 

Where two agents are successively employed to accomplish the same 
object, it has been held that notice to, or knowledge by, one of them 
only, is not notice to the principal, where the one to whom notice is 
given is not the one who finally accomplishes the object, but he has 
ceased to act before that time and he did not impart the notice or 
knowledge to his principal. 22 

This rule, however, must be subject to the qualification that if the 
first agent were such an one that notice to him woud be at once deemed 
notice to his principal, the fact that he subsequently ceased to act would 
not change that result. 

1841. Notice to subagent when notice to principal. The ques- 
tion whether notice to a subagent is notice to the principal depends 
upon considerations already stated. 23 If the subagent be one whom 
the agent was expressly or impliedly authorized to appoint, he is to 
be deemed to be the agent of the principal, and notice to such subagent 
would be notice to the principal as in the case of other agents. 84 But 



agent to release a surety. In a num- 
ber of cases, put upon varying 
grounds, it has been held that a 
surety company which has given bond 
for the conduct of one agent is not 
released by the fact that other agents 
of the same principal subsequently 
learn that the agent in question is 
violating the terms of the bond but 
do not report it to the principal. 
Fidelity Co. v. Courtney, 186 U. S. 
342, 46 L. Ed. 1193; Fidelity Co. v. 
Gate City Nat Bank, 97 Ga. 634, 33 
L. R. A. 821, 54 Am. St. R. 440; Pitts- 
burgh, etc., R. Co. v. Shaeffer, 59 Pa. 
350. 

22 In Blackburn v. Vigors, 17 Q. B. 
Div. 553, the plaintiff had instructed 
a broker to effect for him a reinsur- 
ance upon an over-due ship. While 
this broker was acting on behalf of 
the plaintiff, he received information 
of a material fact tending to show 
that the ship was lost. He did not 
communicate this information to the 
plaintiff and failed to effect the insur- 
ance. Afterwards the plaintiff em- 
ployed another broker who obtained 
insurance from the defendant upon 



the ship, lost or not lost. Subsequent 
events showed that the ship had in 
fact been lost some time before the 
plaintiff attempted to 'effect the rein- 
surance, but neither the plaintiff nor 
the broker who finally obtained the 
insurance knew of, or concealed from 
defendant, any fact tending to show 
that the ship was lost. It was held 
by the Court of Appeal, that the 
knowledge of the first broker must be 
imputed to the plaintiff and that he 
could not recover on the policy, cit- 
ing Fitzherbert v. Mather, 1 T. R. 12; 
Gladstone v. King, 1 M. & S. 35, and 
Proudfoot v. Montefiore, L. R. 2 Q. B. 
511. 

This case was, however, reversed 
by the House of Lords in 12 App. 
Cases, 531. Lord Halsbury said: 
"When a person is the agent to know, 
his knowledge does bind the princi- 
pal. But in this case I think the 
agency of the broker had ceased be- 
fore the policy sued upon was ef- 
fected." 

23 Ante, 332, 333. 

2*Merritt v. Huber, 137 Iowa, 135; 
Bates v. American Mtg. Co., 37 S. C. 



1424 



CHAP. VJ LIABILITY OF PRINCIPAL TO THIRD PARTIES 



if the subagent be the agent of the agent merely, then there is no priv- 
ity between him and the principal, and his knowledge cannot be im- 
puted to the principal. 25 

1842. Notice of what sort of facts imputed Agent's own de- 
fault. The notice or knowledge which is to be imputed to the prin- 
cipal is ordinarily that of extrinsic facts relating to the subject matter 
of the agency as distinguished from the fact that the agent in acting 
has violated his duty or done an unauthorized act. 20 Such acts would 



88, 21 L. R. A. 340; Carpenter v. Ger- 
man-Am. Ins. Co., 135 N. Y. 298; 
Bergeron v. Pamlico Ins. & B. Co., Ill 
N. C. 45; Phoenix Ins. Co. v. Ward, 7 
Tex. Civ. App. 13; Goode v. Georgia 
Home Ins. Co., 92 Va. 392, 53 Am. St. 
Rep. 817, 30 L. R. A. 842; Arff v. 
Star Fire Ins. Co., 125 N. Y. 57, 21 
Am. St. Rep. 721, 10 L. R. A. 609. 

25 Hoover v. Wise, 91 U. S. 308, 23 
L. Ed. 392; Boyd v. Vanderkemp, 1 
Barb. Ch. (N. Y.) 273; Waldman v. 
North British Ins. Co., 91 Ala. 170, 24 
Am. St. Rep. 883. 

26 See Shepard & Morse Lumber Co. 
v. Eldridge, 171 Mass. 516, 68 Am. St. 
Rep. 446, 41 L. R. A. 617. In Fidelity 
Co. v. Courtney, 186 U. S. 342, 46 L. 
Ed. 1193, it is said that the rule that 
knowledge of an agent is in law the 
knowledge of his principal, "is in- 
tended for the protection of the other 
party (actually or constructively) to 
a transaction for and on account of 
the principal had with such agent. 
In the very nature of things, such a 
principle does not obtain in favor of 
a surety who has bonded one officer 
of a corporation, so as to relieve him 
from the obligations of his bond, by 
imputing to the corporation knowl- 
edge acquired by another employee 
subsequent to the execution of the 
bond (and, from negligence or wrong- 
ful motives, not disclosed to the cor- 
poration) of a wrong committed by 
the official whose faithful perform- 
ance of duty was guaranteed by the 
bond." ( See other cases, 1840.) 

But the real reason in this case 
was that the agent who had the no- 
tice owed no duty to report it as 



against the other agent; and, with 
deference, it is believed that the 
statement above quoted is too wide. 

Agent's knowledge of his own con- 
dition. Whether the agent's knowl- 
edge of his own condition, e. g., that 
he has, or has been exposed to, a con- 
tagious disease, can be imputed to his 
principal so as to make him liable for 
its communication to the principal's 
patrons, e. g., passengers dealing with 
a ticket agent who is infected, is dis- 
puted. It was denied in Long v. Chi- 
cago, etc., R. Co., 48 Kan. 28, 30 Am. 
St. Rep. 271, 15 L. R. A. 319, but af- 
firmed in Missouri, etc., R. Co. v. 
Raney, 44 Tex. Civ. App. 517. 

Knowledge by agent of His own 
forgeries Duty to examine the prin- 
cipal's oanJc vouchers. Forgery by 
an agent is not ordinarily an act for 
which the principal is responsible. 
See Weisser v. Denison, 10 N. Y. 68, 
61 Am. Dec. 731; Hardy v. Chesa- 
peake Bank, 51 Md. 562, 34 Am. Rep. 
325. Whether a principal owes the 
bank the duty to examine his bank 
vouchers with a view to the detection 
of a possible forgery, is a question 
upon which the authorities are not 
agreed. That there is no such duty, 
see Weisser v. Denison, 10 N. Y. 68, 
61 Am. Dec. 731; Welsh v. German 
American Bank, 73 N. Y. 424, 29 Am. 
Rep. 175; Frank v. Chemical Nat. 
Bank, 84 N. Y. 209, 38 Am. Rep. 501; 
Shipman v. Bank of N. Y., 126 N. Y. 
318, 22 Am. St. Rep. 821, 12 L. R. A. 
791; Manufacturing Bank v. Barnes, 
65 111. 69, 16 Am. Rep. 576. But com- 
pare Critten v. Chemical Nat. Bank, 
171 N. Y. 219, 57 L. R. A. 529. 



9 



1425 



1843] 



THE LAW OF AGENCY 



[BOOK iv 



ordinarily be done under such circumstances of adverse interest that 
notice of them would be non-imputable under the second exception al- 
ready discussed ; 27 but where the purpose is to impute them and then 
draw an inference of ratification or acquiescence, the attempt is met 
by the sound rule of ratification that ratification with knowledge must 
be based upon actual knowledge and will not be predicated upon a 
mere fiction like that of imputed knowledge.? 8 

1843. These rules apply to corporations Notice to officer or 
agent. These rules apply with particular force to the case of cor- 
porations. From the very nature of the case, the executive functions 
of a corporation can only be exercised through the medium of the cor- 
porate agents to whom and through whom all notice to the corpora- 
tion must come. Notice to the officers and agents of a corporation 
therefore, in reference to those matters to which their authority re- 
lates, is, in general, notice to the corporation. 29 



That there is such a duty, see Dana 
v. National Bank, 132 Mass. 156; 
First Nat Bank v. Allen, 100 Ala. 
476, 46 Am. St. Rep. 80, 27 L. R. A. 
426; Leather Mfrs. Nat. Bank v. Mor- 
gan, 117 U. S. 107, 29 L. Ed. 819. 
Where the duty is held to exist and 
the principal confides the perform- 
ance of the duty to an agent and this 
agent commits the forgery, the duty 
is not performed. Many of the cases 
say that in this instance the knowl- 
edge of the examining agent of his 
own forgery is imputed to the prin- 
cipal. See First Nat. Bank v. Allen, 
100 Ala. 476, 46 Am. St. Rep. 80, 27 
L. R. A. 426; Dana v. National Bank, 
132 Mass. 156; First Nat. Bank v. 
Richmond Elec. Co., 106 Va. 347, 7 
L. R. A. (N. S.) 744. But it would 
seem that the question of notice is 
not material in these cases, which 
may well rest on the non-perform- 
ance of the duty. See Myers v. 
Southwestern Nat. Bank, 193 Pa. 1. 

27 Thus in American Surety Co. v. 
Pauly, 170 U. S. 133, 42 L. Ed. 977, 
it is said: "The presumption that 
the agent informed his principal of 
that which his duty and the inter- 
ests of his principal required him to 
communicate does not arise where 
the agent acts or makes declarations 



not in execution of any duty that he 
owes to the principal, nor within 
any authority possessed by him, but 
to subserve simply his own personal 
ends or to commit some fraud 
against the principal. In such cases 
the principal is not bound by the 
acts or declarations of the agent un- 
less it be proved that he had at the 
time actual notice of them, or having 
received notice of them, failed to 
disavow what was assumed to be 
said and done in his behalf." See 
also Thomson v. Central Pass. Ry. 
Co., 80 N. J. L. 328; Brown v. Har- 
ris, 139 Mich. 372'; Traders Bank v. 
Black, 108 Va. 59; Shepard & Morse 
Lumber Co. v. Eldridge, 171 Mass. 
516, 68 Am. St Rep. 446, 41 L. R. A. 
617. 

28 See ante, 403, 407. 

There is language in United States 
Fidelity Co. v. Shirk, 20 Okla. 576, 
which seems contrary and from 
which the present writer is con- 
strained to dissent, though the con- 
clusion can probably be sustained 
upon the ground that the company 
actually knew that only one agent 
was signing the bonds (p. 579). 

2 Holden v. New York, etc., Bank, 
72 N. Y. 286; Union Bank v. Camp- 
bell, 4 Humph. (Tenn.) 394; Waynes- 



1426 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1844 



But the peculiar characteristics of corporations render it imperative 
that this rule be kept within its proper limits. Not every person who 
is a member of a corporation, or who is connected with it, is its agent. 
Nor is every agent to be deemed to be an agent for all purposes. The 
magnitude of their business and the extent of territory over which their 
operations extend require, in the case of many corporations, that their 
business be divided into several departments, each with its own com- 
plement of superior and inferior agents, and that' agents be employed 
in various capacities, at different points. Attention/ then, must be 
given to the questions whether the assumed agent is, in reality, the 
agent of the corporation in the given transaction/and, if so, does the 
notice or knowledge relate toma'ttejg^TtHin 1 the scope of his authority. ^^ 
S* 1844. -~Wriat" "officer or agent. The officer oFlagent of 
the corporation may be of such a general, managerial, alter ego, sort 
that notice to him concerning matters in which the corporation is inter- c^ 
ested niay be notice to it nierely_J^yjrtjii^^ though _ 

such cases are not common. 

The president of a BanTT or other corporation for 'example, is not 
usually per ^ such an agent, although he undoubtedly may be made 
such. 81 Usually notice to him is notice to the corporation, as in the 
case of other agents, only when it concerns something which falls 
within the sphere of his authority or concerning which he acts as agent 
with the knowledge in his mind. Notice or knowledge coming to him 
in his private and unofficial capacity, concerning matters in which he 
does not act as agent of the corporation, is not imputed to it. 82 The 

ville Nat. Bank v. Irons, 8 Fed. Rep. officer and agent and the sole stock- 

1; Hart v. Farmers', etc., Bank, 33 holder with the exception of one per- 

Vt. 252; Mihills Mfg. Co. v. Camp, 49 son who was non-resident and inac- 

Wis. 130; Webb v. Graniteville Mfg. tive. Lea v. Iron Belt Merc. Co., 147 

Co., 11 S. C. 396, 32 Am. Rep. 479; Ala. 421, 119 Am. St. Rep. 93, 8 L. R. 

Farmers', etc., Bank v. Payne, 25 A. (N. S.) 279. To same effect: An- 

Conn. 444, 68 Am. Dec. 362; Wilson derson v. Kinley, 90 Iowa, 554; 

v. McCullough, 23 Pa. 440, 62 Am. Huron Printing Co. v. Kittleson, 4 

Dec. 347; Fairfleld Savings Bank v. S. Dak. 520; Steam Stonecutter Co. 

Chase, 72 Me. 226, 39 Am. Rep. 319; v. Myers, 64 Mo. App. 527. 
Maryland Trust Co. v. National Me- 31 Thus in Cragie v. Hadley, 99 N. 

chanics Bank, 102 Md. 608; Petersen Y. 131, 52 Am. Rep. 9, it was found 

v. Elholm, 130 Wis. 1; Scripture v. that "the entire control and manage- 

Francistown Soapstone Co., 50 N. H. ment of the bank was in fact in- 

571; Mechanics Bank v. Schaumburg, trusted to and conducted by its presi- 

38 Mo. 228. dent." 

s This is said to be necessarily and 32 Peoples Bank v. Exchange Bank, 

particularly true where the agent 116 Ga. 820, 94 Am. St. Rep. 144; 

who receives the notice is practically Platt v. Birmingham Axle Co., 41 

the corporation itself, being the only Conn. 255; McCalmont v. Lanning, 

1427 



1845] THE LAW OF AGENCY [BOOK IV 

same would be still more true perhaps of the vice-president. 88 Cashiers 
of banks have usually a wide range of authority respecting financial 
transactions, and notice to them in transactions in which they act is im- 
puted to the bank. 34 Where the cashier is made the chief executive of- 
ficer and manager of the bank, his authority to receive notice is corre- 
spondingly increased. 85 

Where the officer or agent is not thus one to whom notice may be 
given because of his position, it must, as in other cases, be notice or 
knowledge of one who is agent with reference to the subject matter to 
which it relates^jj^* 

1845. Ordinary exceptions apply here. Regard must 

also be had to the exceptions to the general rules which have been pre- 
viously considered. Thus, where an officer or agent of the corporation 
himself deals openly as a party in interest, with the corporation, selling 
it property, borrowing money of it, discounting notes with it, and the 
like, the corporation will not be charged with notice of the informa- 
tion which he possesses relating to the transaction and which he does 
not disclose. In such a case the assumed agent is in reality the adverse 
party, and cannot be treated as an agent at all. He is seeking to pro- 
mote and protect his own interests, and it is not to be expected that he 
can or will at the same time protect and advance those of the corpora- 
tion. 37 The same rule applies, as in the other cases already discussed, 

84 C. C. A. 138, 154 Fed. 353; Smith 34 See Birmingham Trust Co. v. 

v. Carmack (Tenn. Ch.), 64 S. W. Louisiana Nat. Bank, 99 Ala. 379; 

372; Mathis v. Pridham, 1 Tex. Civ. Loring v. Brodie, 134 Mass. 453; 

App. 58; Curtice v. Crawford County Black Hills Nat. Bank v. Kellogg, 4 

Bank, 110 Fed. 830. S. Dak. 312; Niblack v. Cosier, 26 C. 

But where he acts for the corpora- C. A. 16, 80 Fed. 596; Cooper v. Hill, 
tion in the matter with the knowl- 36 C. C. A. 402, 94 Fed. 582. ^ 
edge in his mind it is imputed. This was the fact in Bank v. Pen- 
Louisville Trust Co. v. Louisville, land, 101 Tenn. 445. 

etc., R. Co., 22 C. C. A. 378, 75 Fed. 36 McDermott v. Hayes, 116 C. C. A. L- 

433; Willard v. Denise, 50 N. J. Eq. 553, 197 Fed. 129. 

482, 35 Am. St. Rep. 788. But see 37 Wickersham v. Chicago Zinc Co., 

Lanning v. Johnson, 75 N. J. L. 259. 18 Kan. 481, 26 Am. Rep. 784; First 

^Very wide range is given to the Nat. Bank of Hightstown v. Christo- 

president of the bank to receive no- pher, 40 N. J. L. 435, 29 Am. Rep. 

tice in Port Jervis v. First National 262; Innerarity v. Merchants' Nat. 

Bank, 96 N. Y. 550. Bank, 139 Mass. 332, 52 Am. Rep. 710; 

Knowledge by the treasurer of the Washington Bank v. Lewis, 22 Pick, 

acts of the president was imputed (Mass.) 24; Winchester v. Baltimore, 

in Hotchkiss, etc., Co. v. Union Nat. etc!, R, R., 4 Md. 231; Louisiana State 

Bank, 15 C. C. A. 284, 68 Fed. 76. Bank v. Senecal, 13 La. 525; Seneca 

33 Aycock Bros. Lumber Co. v. First County Bank v. Neass, 5 Den. (N. Y.) 

National Bank, 54 Fla. 604; Holm v. 329; National Bank of Commerce v. 

Atlas Nat. Bank, 28 C. C. A. 297, 84 Feeney, 9 S. Dak. 550, 46 L. R. A. 

Fed. 119. 732; Commercial Bank v. Burgwyne, 



LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1847 



CHAP. Vj 

where the corporate agent, though not acting openly as the adverse 
party, is secretly engaged in furthering some fraudulent scheme ad- 
verse to his principal's interest, and which would destroy the agency 
relation between them. 38 

1847. These cases, however, are to be distinguished 

from those in which the agent, for some purpose of his own, fraudu- 
lently assigns, conveys or appropriates to the use of his principal the 
property of another. In such a case, if the principal after knowledge 
of the fraud seeks to appropriate and retain the benefit derived from 
the agent's fraud, he will ordinarily be held to have ratified the act 
and to have assumed responsibility for the means through which it 
was brought about. This question has already been fully considered 
in a preceding section. 39 



110 N. C. 267, 17 L. R. A. 326; Rob- 
erts v. Hughes, (Vt.) 83 Atl. 807; 
Lee v. Elliott, 113 Va. 618; Arlington 
Brewing Co. v. Bluethenthal, 36 App. 
Cas. (D. C.) 209, Ann. Gas. 1912, C. 
294; Whittle v. Vanderbilt Mining 
Co., 83 Fed. 48; First Nat Bank v. 

German Am. Ins. Co., N. Dak. , 

134 N. W. 873; Findley v. Cowles, 93 
Iowa, 389; First Nat Bank v. Foote, 
12 Utah, 157; American 'Nat. Bank v. 
Ritz, 70 W. Va. 409, 40 L. R. A. (N. 
S.) 156; Merchants Nat. Bank v. Lov- 
ett, 114 Mo. 519, 35 Am. St. Rep. 770; 
Seaverns v. Presbyterian Hospital, 
173 111. 414, 64 Am. St Rep. 125; Dorr 
v. Life Ins. Co., 71 Minn. 38, 70 Am. 
St. Rep. 309; National Bank v. 
Feeney, 9 S. Dak. 550, 46 L. R. A. 
732; First Nat. Bank v. Tompkins, 6 
C. C. A. 237, 57 Fed. 20; Third Nat. 
Bank v. Harrison, 10 Fed. 243. Thus 
where the general superintendent of 
a corporation conveyed to it, with 
warranty, lands which he had pur- 
chased in his own interests and 
which were subject to a prior lease, 
of which he had actual knowl- 
edge, it was held that his knowl- 
edge could not be imputed to 
the corporation. Wickersham v. Chi- 
cago Zinc Co., 18 Kan. 481, 26 Am. 
Rep. 784. So where the president of 
a corporation conveyed to it land 
subject to a prior equity against him- 
self, the corporation was held not 



chargeable with his knowledge. 
Frenkel v. Hudson, 82 Ala. 158, 60 
Am. Rep. 736. 

as See ante, 1815 et seq. 

3 See ante, 1818, note 84. Thus 
if the cashier or other officer of a 
bank who is secretly a defaulter 
takes or uses the money of A with- 
out authority to make good or cover 
up his default, the bank, if it seeks 
to retain the money after notice of 
the fraud will be held charged with 
the cashier's fraud and can acquire 
no title against A. Atlantic Cotton 
Mills v. Indian Orchard Mills, 147 
Mass. 268, 9 Am. St Rep. 698. So a 
bank is chargeable with notice of 
facts vitiating the title to securities 
obtained by the collusion of its teller 
with an officer of another bank, by 
certifying as "good" the check of an 
irresponsible person which is taken 
by such other bank. Atlantic Bank 
v. Merchants' Bank, 10 Gray (Mass.), 
532. So where the treasurer of a 
town, being also cashier of a bank, 
gave a note as treasurer of the town 
to raise money for his private use, 
and discounted the note as cashier, 
the bank was held charged with 
knowledge of his fraud. First Nat. 
Bank of New Milford v. Town of 
New Milford, 36 Conn. 93. So where 
the cashier of a bank, who was also 
treasurer of another corporation, de- 
posited securities of the latter to ob- 



1429 



1848] THE LAW OF AGENCY [BOOK IV 

1848. When notice must be acquired. It has been said 

in many cases that notice to an officer or agent of a corporation will 
not be notice to the corporation unless such notice was received while 
the officer or agent in question was actually acting as such ; or, to put 
it in a- different form, that the corporation will not be charged with 
notice which comes to its officer or agent while the latter was acting 
in his private or individual capacity. 40 This question deserves a some- 
what closer analysis than it ordinarily receives. As has already been 
pointed out, it is held by some courts, proceeding upon the theory of 
the legal identification of the principal with his agent, that notice re- 
ceived prior to the commencement of the agency is not to be imputed 
to the principal, because at that time it was impossible that they 
should be identified. Certain of the cases referred to can be dis- 
posed of upon this ground, and are entirely consistent with it. The 
same statement, however, is riot infrequently made by courts which 
base the imputation of notice upon the agent's duty to communicate, 
and these are the cases which chiefly require consideration. The ex- 
planation here is simple and consistent. If information comes to an 
agent while he is actually acting about the subject-matter of his 
agency, and the information relates to it, such information is imputa- 
ble to the principal under either rule. This is notice per se, and if is 
immaterial whether the agent heeds it or forgets it or not. If, how r 
ever, the information comes to him while he is not actually engaged 
in the exercise of his agency, even though it be conceded that he was 
agent at the time, the question whether it is to be imputed to his princi- 
pal will depend upon a variety of circumstances. Under the second 

tain a loan for the use of the former 72 Me. 226, 39 Am. Rep. 319; General 

bank. Fishkill Savings Inst v. Bost- Ins. Co. v. United States Ins. Co., 10 

wick, 19 Hun (N. Y.), 354. See also, Md. 517, 69 Am. Dec. 174; Washing- 

Holden v. New York, etc., Bank, 72 ton Bank v. Lewis, 22 Pick. (Mass.) 

N. Y. 286. But see Hummell v. Bank 24; First Nat. Bank v.' Christopher, 

of Monroe, 75 Iowa, 689. 40 N. J. L. 435, 29 Am. Rep. 262; 

*o People's Bank of Talbotton v. Casco Nat. Bank v. Clark, 139 N. Y. 

Exchange Bank of Macon, 116 Ga. 307, 36 Am. St Rep. 705; Westfleld 

820, 94 Am. St Rep. 144; The Texas Bank v. Cornen, 37 N. Y. 320, 93 Am. 

Loan Agency v. Taylor, 88 Tex. 47; Dec. 573; Bank of U. S. v. Davis, 2 

Reid v. Bank of Mobile, 70 Ala. 199; Hill (N. Y.), 451; Bank of Pittsburg 

Brennan v. Emery, etc., Dry Goods v. Whitehead, 10 Watts (Pa.), 397, 36 

Co., 99 Fed. 971; Grayson Co. Nat. Am. Dec. 186; Kearney Bank v. Fro- 

Bank v. Hall, 91 S. W. 807 (Tex. Civ. man, 129 Mo. 427, 50 Am. St. Rep. 

App.); Farmers, etc., Bank v. Payne, 456; Benton v. German American 

25 Conn. 444, 68 Am. Dec. 362; Lyne National Bank, 122 Mo. 332; Penfield 

v. Bank of Ky., 5 J. J. Marsh. (Ky. ) Invest. Co. v. Bruce, 132 Mo. App. 

545; Mercier v. Canonge, 8 La. Ann. 257. 
37; Fairfield Savings Bank v. Chase, 

1430 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1849 

theory, the question at once arises, was it his duty to communicate it to 
his principal ? This will depend upon two considerations, i. Whether 
he is such a general, managerial officer that notice to him is notice 
to the corporation merely by virtue of his position ; and 2. Whether 
though it is not imputable per se, it becomes notice because the 
agent afterward acts with reference to the subject matter with the 
knowledge present in his mind. Suppose an agent, who regularly and 
habitually acts, during business hours, with reference to a certain sub- 
ject, during the evening, while away from his place of business and at 
his home or in some social gathering, receives in his "private and in- 
dividual capacity" information pertinent and material to the subject 
upon which he has been acting during the day and upon which he re- 
sumes action at the opening of business on the morrow, with this in- 
formation actually in his mind. Would it be contended, under either 
rule, that this information would not be imputed to his principal? 

1849. Suppose that the president of a bank, while ab- 
sent from the bank and engaged upon his private affairs, learns some- 
thing concerning X. X is not at that time a customer of the bank, 
and, so far as the president knows, neither has nor contemplates hav- 
ing any business relations or dealings with it. Suppose, however, that 
the next day X, without the knowledge of the president, and with ref- 
erence to matters not within the president's authority, has dealings, 
with the bank through its cashier or board of directors, to which deal- 
ings the information received by the president would be material. 
Would it now be contended that such information would be imputed? 
Obviously it could not be, because it did not come to an agent who 
had any authority or duty with reference to the subject-matter to 
which it related, and there was nothing to suggest to him that it was 
a matter of any consequence to his principal or to impose any duty to 
communicate it. The result would not have been different if the im 
formation had come to the president while he was sitting in his office 
at- the bank and actually transacting its business, if, as before, there 
was nothing to suggest that it was a matter in which he or the bank 
had any interest. 41 Suppose, however, that though, when the presi- 
dent received this information, it seemed of no importance to the 
bank, he should be called upon next day, or at any other time while 
the information was actually fresh in his mind, to deal with X for the 
bank with reference to a matter to which the information was material. 
Would it be doubted now that the information would be imputed to the 

See Washington Nat. Bank v. Pierce, 6 Wash. 491, 36 Am. St. Re-p. 174. 

1431 



1850, 1851] THE LAW OF AGENCY [BOOK IV 

bank? Suppose still further, in the latter case, that because, when 
he received it, it seemed to be a matter of no interest to him or to his 
principal, the president paid little or no attention to it ; or that, for the 
same reason, it soon passed from his mind, and later, when he was 
unexpectedly called upon to act, the information had actually been for- 
gotten. Would it now be imputed ? It is assumed that it would not be. 

1850. The question, then, in all these cases, would seem 

to be, not whether the information was received by the agent in his 
private or individual capacity, but whether it was received at such 
time and under such circumstances as to impose upon him the duty 
to give heed to it or whether he afterwards acted with it present in 
his mind. In the former case it is notice in itself. On the other hand, 
notice or information coming to an agent of a corporation in his pri- 
vate and individual capacity concerning a matter as to which he had 
no authority or duty to act, or as to which he never did in fact act, 
would not be imputed to the corporation, even though the corpora- 
tion, through some other agent, who did not have the information, 
should act upon the subject-matter to which it related. So notice com- 
ing to an agent, even while acting generally in the execution of his 
agency, but which had no such present relevancy or importance as to 
impose a duty to communicate it, would not be imputed. 42 But if, in 
any of these cases, the agent later acted as such upon some matter to 
which that notice was relevant and with the knowledge still present 
in his mind, it would then be notice. 

1851. When notice to director is notice to corporation. 

The question frequently arises whether notice to a director of a corpo- 
ration is notice to the corporation. In dealing with this question, re- 
gard must be had to the scope and nature of the director's powers. 
The directors of a corporation are not individually its agents for the 
transaction of its ordinary business, which is usually delegated to its 
executive officers, such as its president, secretary, treasurer and the 
like. Directors are, it is true, possessed of extensive powers even to 
the extent of absolute control over the management of its affairs, but 
these powers reside in them as a board and not as individuals, and only 
when acting as a board in their collective capacity are they the repre- 
sentatives of the corporation. Notice to them when assembled as a 

See McDennott v. Hayes, 116 ence to that matter with the informa- 

C. C. A. 553, 197 Fed. 129. But tion still in his mind, it would then 

though the information was not no- be imputed. Pennoyer v. Willis, 26 

tice when acquired, if the agent is Ore. 1, 46 Am. St. Rep. 594. 
later called upon to act with refer- 

1432 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1852 



board would undoubtedly be notice to the corporation. 43 So notice 
to an individual director which is in fact communicated to the board 
by him is notice to the corporation, for this thus becomes notice to the 
board. 44 

1852. But it is well settled, as a general rule, that the 

mere private knowledge of one or more individual directors concern- 
ing any business of the corporation (as to which such director has 
then no special duty or authority to act, or upon which he does not 
subsequently act with such knowledge in his mind, and which he does 
not communicate to the board) is not to be imputed to the corpora- 
tion. 45 This rule, however, is subject to certain exceptions resting 
upon obvious principles. Thus it has been said that notice communi- 
cated to a director officially for the express purpose of being com- 
municated to the board is notice to the board, although he may have 
failed to do so, as it is clearly his duty to so communicate it and he 
ought to be conclusively presumed to have done his duty. 48 Whether 
this is true, however, may perhaps be open to question. 



First National Bank of Rights- 
town v. Christopher, 40 N. J. L. 435, 
29 Am. Rep. 262; Fulton Bank v. 
New York, etc., Canal Co., 4 Paige 
(N. Y.), 127; Toll Bridge Co. v. Bets- 
worth, 30 Conn. 380; In re Marseilles, 
etc., Ry. Co., 7 Ch. Ap. 161. 

44 Farmers, etc., Bank v. Payne, 25 
Conn. 444, 68 Am. Dec. 362; Bank of 
Pittsburgh v. Whitehead, 10 Watts 
(Pa.), 397, 36 Am. Dec. 186. 

45 Ayers v. Green Gold Mining Co., 
116 Cal. 333; Lothian v. Wood, 55 
Cal. 159; Murphy v. Gumaer, 12 Colo. 
App. 472; Farmers, etc., Bank v. 
Payne, 25 Conn. 444, 68 Am. Dec. 362; 
Farrel Foundry v. Dart, 26 Conn. 
376; Home Bank v. Peoria Ag'l So- 
ciety, 206 111. 9, 99 Am. St. Rep. 132; 
Lyne v. Bank of Ky., 5 J. J. Marsh. 
(Ky.) 545; Louisiana State Bank v. 
Senecal, 13 La. 525; Mercier v. 
Canonge, 8 La. Ann. 37; Fairfleld 
Savings Bank v. Chase, 72 Me. 226, 
39 Am. Rep. 319; B. & O. R. R. Co. v. 
Canton Co., 70 Md. 405; Winchester 
v. Baltimore, etc., R. R. Co., 4 Md. 
231; General Ins. Co. v. United 
States Ins. Co., 10 Md. 517, 69 Am. 
Dec. 174; United States Ins. Co. v. 
Shriver, 3 Md. Ch. 381; Sawyer v. 



Pawners Bank, 6 Allen (Mass.), 201; 
Washington Bank v. Lewis, 22 Pick. 
(Mass.) 24; Kearney Bank v. Fro- 
man, 129 Mo. 427, 50 Am. St. Rep. 
456; Yello.w Jacket Silver Min. Co. 
v. Stevenson, 5 Nev. 224; First Nat. 
Bank of Hightstown v. Christopher, 
40 N. J. L. 435, 29 Am. Rep. 262; 
Casco Nat. Bank v. Clark, 139 N. Y. 
307, 36 Am. St. Rep. 705; Merchants 
Nat. Bank v. Clark, 139 N. Y. 314, 36 
Am. St. Rep. 710; Westfleld Bank v. 
Cornen, 37 N. Y. 320, 93 Am. Dec. 
573; Bank of U. S. v. Davis, 2 Hill 
(N. Y.), 451; National Bank v. Nor- 
ton, 1 Hill (N. Y.), 572; Atlantic 
Bank v. Savery, 18 Hun, 36, s. c. 82 
N. Y. 291; Getman v. Second National 
Bank, 23 Hun (N. Y.), 498; La Farge 
Fire Ins. Co. v. Bell, 22 Barb. (N. Y.) 
54; Wilson v. McCullough, 23 Pa. 
440, 62 Am. Dec. 347; Bank of Pitts- 
burg v. Whitehead, 10 Watts (Pa.), 
397, 36 Am. Dec. 186; Custer v. 
Tompkins Co. Bank, 9 Pa. 27; Ward- 
law v. Troy Oil Mill, 74 S. C. 368, 114 
Am. St. Rep. 1004; Continental Nat. 
Bank v. McGeoch, 92 Wis. 286; Law- 
rence v. Holmes, 45 Fed. 357. 

46 United States Ins. Co. v. Shriver, 
3 Md. Ch. 381; Boyd v. Chesapeake, 



1433 



1853] 



THE LAW OF AGENCY 



[BOOK iv 



1853. ' ' So it has been held that a corporation is properly 
to be charged with information possessed by an individual director, 
whether disclosed or not, if, while possessing such knowledge, he acts 
with the board and as a member of it, upon the very matter to which 
the information relates. 47 In such a case there is the strongest possi- 
ble duty resting upon the director to communicate his information to 
the board, and it may well be presumed, as against the corporation, 
that he has done so. But, in accordance with the exception which has 
been heretofore noticed, that the agent will not be presumed to com- 
municate information hostile to his own interests, it has been held that 
when a director is himself dealing as the other party with the corpo- 
ration, the corporation will not be charged with notice of that knowl- 
edge possessed by the director which his own interest impelled him to 
conceal, 4 * even though he is present but does not act with the board in 



etc., Canal Co., 17 Md. 195, 79 Am. 
Dec. 646. 

See also the case of Tryon v. White, 
etc., Co., 62 Conn. 161, 20 L. R. A. 
291, where the statement of a director 
that he would advise the board about 
a certain matter which he did not 
do was held admissible. .Two judges 
dissented. 

47 Beacon Trust Co. v. Souther, 183 
Mass. 413; National Security Bank v. 
Cushman, 121 Mass. 490; Innerarity 
v. Merchants' National Bank, 139 
Mass. 332, 52 Am. Rep. 710; Union 
Bank v. Campbell, 4 Humph. (Tenn.) 
394; Bank of United States v. Davis, 
2 Hill (N. Y.), 451; Clerk's Savings 
Bank v. Thomas, 2 Mo. App. 367. 

48 "A bank or other corporation can 
act only through agents, and it Is 
generally true, that if a director, who 
has knowledge of the fraud or illegal- 
ity of the transaction, acts for the 
bank, as in discounting a note, his 
act is that of the bank and it is af- 
fected by his knowledge. National 
Security Bank v. Cushman, 121 Mass. 
490. But this principle can have no 
application where the director of the 
bank is the party himself contracting 
with it. In such case the position he 
assumes conflicts entirely with the 
idea that he represents the interests 
of the bank. To hold otherwise 



might sanction gross frauds by im- 
puting to the bank a knowledge those 
properly representing it could not 
have possessed." Devens, J., in Inne- 
rarity v. Merchants' National Bank, 
139 Mass. 332, 52 Am. Rep. 710. In this 
case A shipped a cargo to B for sale 
on A's account, but gave B a bill of 
lading in latter's name. B was a di- 
rector in defendant's bank. B bor- 
rowed a large sum of money of the 
bank and, without authority of A, 
pledged the bill of lading as security. 
B met (though he seems not to have 
acted) with the board in approving 
the loan but gave the board no notice 
of the true ownership of the cargo, 
nor did the bank have notice 
from any other source. In an action 
by the owner of the cargo it was held 
that the bank could not be charged 
with knowledge of the director's 
fraud. 

In First National Bank of Hights- 
town v. Christopher, 40 N. J. L. 435, 
29 Am. Rep. 262, P, a member of a 
firm, procured at a bank of which he 
was a director, the discount of a note 
belonging to the firm, knowing that 
the note had been obtained by fraud, 
but not disclosing this fact to the 
other officers of the bank. The bank 
sued upon the note and were allowed 
to recover, the court holding that the 



1434 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ 1854 



reference to it. 49 A director may, also, either by custom, acquiescence 
or express appointment, be charged with the performance of certain 
corporate duties, in respect to which he is to be regarded like any other 
agent of the corporation, and notice to him regarding such matters 
will be notice to the corporation. 50 

1854. Notice to stockholder not notice to the corpora- 
tion. The stockholders of a corporation, as such, are in no sense 
the agents of the corporation. They may, of course, be invested, like 
other individuals, with representative powers by the corporation, and 
would in that event be treated like other agents ; but their mere posi- 
tion as stockholders gives them no such authority. Notice to one or 
a part of the individual stockholders is, therefore, not notice to the 
corporation unless actually communicated to it. 51 



knowledge of the director could not 
be imputed to the bank. [But as to 
this case, see the case of Lanning v. 
Johnson, 75 N. J. L. 259.] To same 
effect: Commercial Bank v. Cunning- 
ham, 24 Pick. (Mass.) 270, 35 Am. 
Dec. 322; National Security Bank v. 
Cushman, 121 Mass. 490; Frost v. 
Belmont, 6 Allen (Mass.), 152. See 
also, Atlantic Cotton Mills v. Indian 
Orchard Mills, 147 Mass. 268, 9 Am. 
St. Rep. 698. 

In Mayor, etc. v. Tenth Nat. Bank, 
111 N. Y. 446, the commissioners for 
the building of the court house fraud- 
ulently raised checks, and the de- 
fendant paid them. Three of the 
commissioners were directors of the 
bank, but did not act for the bank 
in this matter, Bliss, its president, 
representing it solely, and he was 
innocent of the fraud. The court re- 
fused to charge the bank with the 
knowledge of the fraudulent raising 
of the checks, because the directors 
of the bank, who participated in the 
fraud, had such knowledge. English- 
American Loan Co. v. Hiers, 112 Ga. 
823; Martin v. South Salem Land 
Co., 94 Va. 28; Hatch v. Ferguson, 15 
C. C. A. 201, 66 Fed. 668. 

4 Innerarity v. Merchants' Na- 
tional Bank, 139 Mass. 332, 52 Am. 
Rep. 710; Custer v. Tompldns County 
Bank, 9 Pa. 27; Terrell v. Branch 
Bank of Mobile, 12 Ala. 502. 



United States Bank v. Davis, 2 Hill 
(N. Y.), 451; and Union Bank v. 
Campbell, 4 Hump. (Tenn.) 394, are 
sometimes thought to be contra, but 
there the director acted in the first 
case, and in the second he withdrew 
for the moment, but this was thought 
to be colorable. These cases have 
been criticised and denied. See In- 
nerarity v. Merchants' National 
Bank, supra. They are cited with 
approval in Tagg v. Tennessee Na- 
tional Bank, 9 Heisk. (Tenn.) 479. 

50 Smith v. South Royalton Bank, 
32 Vt. 341, 76 Am. Dec. 179. 

51 Pittsburgh Bank v. Whitehead, 10 
Watts (Penn.), 397, 36 Am. Dec. 186; 
Union Canal v. Loyd, 4 Watts & S. 
(Penn.) 393; Custer v. Tompkins Co. 
Bank, 9 Pa. St. 27; Wilson v. McCul- 
lough, 23 Pa. 440, 62 Am. Dec. 347; 
Housatonic, etc., Bank v. Martin, 1 
Mete. (Mass.) 294; Burt v. Batavia 
Mfg. Co., 86 111. 66; Franklin Min. 
Co. v. O'Brien, 22 Colo. 129, 55 Am. 
St. Rep. 118; Mercantile Nat. Bank 
v. Parsons, 54 Minn. 56, 40 Am. St. 
Rep. 299; Seeger Refrig. Co. v. Amer- 
ican Car Co., 171 Fed. 416; First Nat. 
Bank v. Anderson, 28 S. C. 143. 

See also, Pearsall v. Western Union 
Tel. Co., 124 N. Y. 256, 21 Am. St. 
Rep. 662. 

Notice to promoter is not usually 
notice to corporation. Franklin Min. 
Co. v. O'Brien, supra. 



1435 



l &55> ^56] THE LAW OF AGENCY [BOOK IV 

But there are many cases in which notice to all of the stockholders 
must be deemed notice to the corporation. Thus where all the per- 
sons who organized a corporation had notice of a defect in the title to 
property acquired by the corporation through them, it was held that 
the corporation must be deemed to be affected by their knowledge or 
notice. 52 



IV. 

THE LIABILITY OF THE PRINCIPAL FOR HIS AGENT'S TORTS AND CRIMES 

1855. In general. The question of the liability of the principal 
for the wrongful acts of his agent may present itself in a great variety 
of forms and may involve a great variety of considerations. In the 
first place with reference to the nature of the act, the thing 'complained 
of may be the agent's negligence ; it may be his wanton, wilful or ma- 
licious act; it may be an act of fraud, misrepresentation or deceit; it 
may be an act prohibited under penalty ; it may be an act that consti- 
tutes a crime. With respect to the circumstances under which the act 
was done, the particular act may have been specifically directed by 
the principal; it may be the direct and immediate result of some act 
specifically directed by the principal ; it may be an act expressly for- 
bidden by the principal ; it may have been an act which the principal 
feared and specifically warned against ; it may have been an act wholly 
unforeseen and unanticipated by the principal ; it may have been an act 
which in its precise form could not fairly have been anticipated and 
was not reasonably to be foreseen. 

With respect to either of these matters this enumeration of possibil- 
ities is by no means exhaustive. 

In many of the cases in which the questions here suggested will 
arise, the relation will be more likely to be that of master and servant 
than that of principal and agent. But the two relations, even if there 
be a clear distinction between them, are here so much alike and the 
rules governing them are in general so similar that it seems entirely 
permissible to take illustrations from either field. 

1856. Theories of liability. In dealing with the question of 
the principal's liability in these cases, the question may perhaps be ap- 
propriately asked at the outset, why should a principal be liable for 

52 Simmons Creek Coal Co. v. Hoffman Steam Coal Co. v. Cumber- 

Doran, 142 U. S. 417, 35 L. Ed. 1063. land Coal Co., 16 Md. 456, 77 Am. 

See also, Carter v. Gray, 79 Ark. Dec. 311. See also, ante, 1844, note 

273; Deal v. Chase, 31 Mich. 490; 30. 

1436 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1856 

the wrongful acts of his agent at all. It is, in general, true that one 
man answers for his own wrongful acts only and not for those of an- 
other. If an agent or servant commits a wrongful act, why, in these 
days when every man is sui juris, should not the servant or agent an- 
swer for his act rather than his principal or master. A great variety 
of answers has been suggested and some of the cases may not be dif- 
ficult to deal with. If the act be one which was specifically and immedi- 
ately directed by the principal, it may be charged to him as being really 
his own act, the servant or agent intervening merely as a mechanical in- 
strument. The same result may perhaps be reached where the act, 
though not specifically commanded, is the direct, immediate, to be ex- 
pected, consequence of some act which was commanded. Again there 
are many cases in which it is not difficult to see that the principal or 
master was guilty of some personal default or negligence, and responsi- 
bility may be traced to him on that ground. Such a case may be one 
where the principal or master has been negligent in the selection or re- 
tention of the servant or agent, or has failed to use proper care in su- 
pervising the act or in guarding against danger. But suppose the act 
cannot be brought under either of these heads, and that the principal 
or master is not himself at fault, but has exercised all reasonable care 
and caution in the selection and retention of his servant or agent, and 
in supervising and controlling the work to be done ; and suppose further 
that the work is such as can be done in safety, under the conditions 
which the principal or master has selected, if now the servant or agent 
injures some third person by his negligence or misconduct, why should 
the principal or master, who is not himself at fault, be held responsi- 
ble, instead of the servant or agent who is at fault? Many answers 
to this question have been proposed, no one of which seems entirely 
satisfactory. Attempts have been made to account for it on purely his- 
torical grounds, but if it had no other foundation it probably should 
not and would not long continue. It is sometimes said that, as the prin- 
cipal or master is the one who put the force in motion, he is the one 
who should answer for its consequences ; but this seems to put the em- 
ployment of an agent or servant on the same perilous footing as the 
keeping of a wild beast or the employment of unusually dangerous 
forces. It is sometimes said that the principal or master is the one who 
is to get the benefit, and therefore he should take the burdens also. 
But it is not true in the ordinary case that the principal or master is 
the only one who receives the benefit. Being employed may be just as 
great a benefit to the servant or agent and may be just as much his 
business or profession in life, as employing him may be beneficial to 
the principal or master and constitute his business or calling in life. 

1437 



1857, !858] THE LAW OF AGENCY [BOOK IV 

From the standpoint of society at large, the employment of each may 
be equally beneficial. It is sometimes said that employers, as a class, ' 
are more likely to be pecuniarily able to respond in damages than em- 
ployees as a class, and therefore, for the protection of third persons, a 
remedy should be given against the employer. But this argument is 
one which obviously must be confined within very narrow limits. Pe- 
cuniary ability to meet it is, when standing alone, a not very just 
ground for imposing a liability. Sympathy for the unfortunate, per- 
haps, in some degree, prejudice against the more fortunate, neither of 
them of course good legal reasons, undoubtedly often enters in. 

As a result, however, of some of these reasons, perhaps of a combi- 
nation of all of them, it has for many years been a definitely formu- 
lated principle in our legal system that the principal should answer for 
the acts of his agent, and the master respond for the conduct of his 
servant, in a great variety of cases, in which no personal misconduct 
or default on the part of the principal or master would furnish an ade- 
quate explanation. Moreover, instead of. diminishing with the pro- 
gress of time, the tendency everywhere seems to be to enlarge the lia- 
bility of the principal or master, either by judicial decision or by direct 
legislation. 

1857. Accepting as a fact that the principal or master. 

may be held liable, in many cases, for the misconduct of his agent or 
servant, the effort must be to determine in what cases the liability will . 
so attach, and what will be the extent of the liability. For this pur- 
pose it may be convenient to consider the liability of the principal or 
master, first, for acts expressly directed by him; second, for the negli- 
gence of his servant or agent; third, for the wanton, wilful or ma- 
licious acts of the servant or agent; fourth, for the fraud, misrepre- 
sentation or deceit of the servant or agent ; fifth, the principal's civil 
liability for the penal or criminal act of his servant or agent ; and sixth, 
the penal or criminal liability of the principal or master for the penal 
or criminal act of his servant or agent. 

Before taking up these questions, however, a preliminary question 
of much importance must be considered, namely whether the relation 
of principal and agent or master and servant actually exists. 

, ,[., .-, v fj >i--nter>ni.-io ifiqhnhij oflf lfjf!j hip? esmjJomo? ?.t il < -.a^cacfl 
1. Did Relation of Principal and Agent or of Master and Servant Exist. 

1858. Necessity for existence of relation. In all of the discus- 
sions of this question, it is constantly assumed, and it is always a con- 
dition precedent, that the relation of principal and agent, or master 
and servant, shall actually exist. That this is so seems often to be 

1438 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1859 

easily overlooked, and it cannot very well be unduly emphasized. Two 
quotations from a single court, out of many similar ones, may there- 
fore be justified. 

"A person, either natural or artificial, is not liable for the acts or 
negligence of another, unless the relation of master and servant or 
principal and agent exists between them." B3 

"There can be no recovery against one charged with negligence upon 
the principle of respondeat superior, unless it be made to appear that 
the relation of master and servant in fact existed, whereby the negli- 
gent act of the servant was legally imputable to the master." 5 * 

The relation must also exist at the time in question. If it had not 
yet begun, or if it had already terminated, 55 no liability can ordinarily 
arise. 

1859. When relation exists. It being thus true, as has been 
pointed out, that in order to hold one man responsible for the torts of 
another, it is. in general necessary to show that the one sought to be 
held responsible stood in the relation of principal or master of the 
wrongdoer with respect of the act done, it becomes material to dis- 
cover the tests by which the existence of that relation, in a given case, 
may be determined. In the ordinary case the matter presents no es- 
sential difficulty. He is the principal or master who is designated as 
such by the acts of employing and paying compensation. But, as has 
been seen, formal employment is not always essential to the existence 
of the relation ; neither is payment of compensation. 56 A father, for 

ss Painter v. Mayor, etc., of Pitts- servant after he has been discharged, 

burg, 46 Pa. 213. Johnson v. Martin, 11 La. Ann. 27, 66 

s*Patton v. McDonald, 204 Pa. 517 Am. Dec. 193. 

(at p. 528). See also Beard v. Lon- 56 A person is responsible as mas- 
don Omnibus Co., [1900] 2 Q. B. 530. ter for the negligence of another 

6 That there is no liability ordi- whom he has engaged as chauffeur 

narily for what the former servant of his automobile and whom he is 

or agent does after the relation is teaching to run it and to whom he 

terminated, is taken for granted in has extended the use of it, even 

Baston v. Hitchcock, [1912] 1 K. B. though such chauffeur is still em- 

535, and therefore plaintiff attempted ployed and paid by some one else, 

to establish a warranty on the part Irwin v. Judge, 81 Conn. 492. 
of the principal that his agents Where a man was allowed to take 

would not, after the termination of an automobile with a view to show- 

the agency, disclose information ac- ing it to a possible purchaser, and, 

quired during the agency. The at- after having done so without selling 

tempt was unsuccessful. it, to keep it several days without 

As to persons to whom the master further authority, during which time, 

is not obliged to give notice of ter- while using it for his own purposes, 

mination, and where there is no ele- he negligently injured the plaintiff, 

ter is not liable for the acts of the it was held that there was neither 

ment of estoppel involved, the rnas- such a relation of agency or of mas- 

1439 



1859] 



THE LAW OF AGENCY 



example, may make his child his servant without either of these acts ; 57 
and one person may, expressly or tacitly, so far accept and adopt even 
the voluntary and gratuitous service of another as to assume responsi- 
bility, in legal contemplation, for his acts. 58 

It is not essential, moreover, that the person sought to be held as 
principal or master shall, in person, have employed or authorized the 
servant or agent. He may, either expressly or by implication, confide 
the performance of this act to an agent, or he may subsequently ratify 
what some one without authority has assumed to do in this respect 
as his agent. 

It is also not indispensable that the alleged servant or agent shall ac- 
tually know who was his master or principal. That is a question of 



ter and servant as would make the 
owner liable. Goodrich v. Musgrave 
Fence & Auto Co., 154 Iowa, 637. 

Range of choice as to selection 
Licensed employee Compulsory 
Pilots. The mere fact that one may 
employ only a licensed or certified 
person as servant, does not affect the 
relation, where there is in fact a sub- 
stantial range of choice and he may 
exercise over the employee the ordi- 
nary power of control. Martin v. 
Temperley, 4 Q. B. 298. 

A statute requiring the employ- 
ment of a licensed mine foreman, and 
which the court construed as prac- 
tically taking away the owner's right 
of control, was held unconstitutional 
in Durkin v. Kingston Coal Co., 171 
Pa. 193, 50 Am. St. Rep. 801, 29 L. R. 
A. 808. 

Not followed in Fulton v. Wilming- 
ton Star Min. Co., 66 C. C. A. 247, 133 
Fed. 193, relying on other cases in 
Illinois. 

Where the owner of a ship must 
take a pilot, to be chosen arbitrarily, 
e. g., the one who first offers his serv- 
ices, and must give him full control 
of the vessel, he cannot be held, at 
common law, for his default. Rams- 
dell Transp. Co. v. Compagnie Gen., 
182 U. S. 406. 

57 In Stowe v. Morris, 147 Ky. 386, 
39 L. R. A. (N. S.) 224, it was held 



that where a father provided an au- 
tomobile for family use and allowed 
his son to use it whenever the family 
pleasure suggested, the son in taking 
it out and using- it for a pleasure ride 
of himself, his sister and some invited 
friends must be deemed to be using 
it as the father's servant. Daily v. 
Maxwell, 152 Mo. App. 415, and Lash- 
brook v. Patten, 1 Duv. (Ky.) 316, 
were relied upon. Doran v. Thomsen, 
76 N. J. L. 754, 19 L. R. A. (N. S.) 
335; McNeal v. McKain, 33 Okla. 449, 
41 L. R. A. (N. S.) 775, reach the op- 
posite conclusion on much the same 
facts. (See also Moon v. Mathews, 
227 Pa. 488, 136 Am. St. Rep. 902, 29 
L. R. A. (N. S.) 856; Smith v. Jor- 
dan, 211 Mass. 269.) 

In Brittingham v. Stadiem, 151 N. 
C. 299, there was evidence that the 
defendant's minor son was prac- 
tically made a clerk in defendant's 
gun shop so as to charge the father 
with the son's negligence. 

ss Thus, in Hill v. Morey, 26 Vt. 
178, where the defendant was repair- 
ing a fence between his own and the 
the plaintiff's land and a neighbor 
began assisting the defendant, with- 
out any request, but merely with the 
instruction from the latter not to cut 
on the plaintiff's land, the defendant 
was held liable for a trespass by the 
neighbor upon the plaintiff's land. 



1440 



CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES 



[ i860 



law, which can not be controlled by what the agent or servant happened 
to think or believe about it. 

1860. Several masters of one servant General and spe- 
cial master Lending servants Adopting servants of others. It. is 
entirely possible, also, that two different persons may at the same time 
severally stand in the attitude of principal or of master in some re- 
spect of the same agent or servant, with reference to different acts 
which he may perform. One may be his principal as to one act or class 
of acts and the other his principal as to other acts. 50 One may be what 
is often called "the general master," while the other may be "the spe- 
cial master." Thus a master may, with the consent of his servant, 
lend his servant to another in such a way that, while the original con- 
tract of employment may still continue and the first master may con- 
tinue to pay the servant's compensation, the servant will, nevertheless, 
become so far the servant for the time being of the borrower as to 
make the latter responsible to third persons for injuries caused by him 
during the performance of the work of the borrower. 60 



59 The question in such a case must 
usually be, for which of his several 
masters the act in question was per- 
formed to whose service did it be- 
long for whom was he acting when 
he performed it? 

Thus in a recent case a deputy 
sheriff, who had been appointed at 
the request of a railway company by 
whom he was paid, and who spent 
most of his time in guarding its prop- 
erty, shot a person under circum- 
stances which did not afford justi- 
fication; it was held as a matter of 
fact that his act was done in his ca- 
pacity as private watchman of the 
railway company rather than in his 
capacity as a public officer, and there- 
fore the company was liable. Texas, 
etc., R. Co. v. Parsons, 102 Tex. 157, 
132 Am. St. Rep. 857. 

Many other cases involving the 
same question are cited in the notes 
to 1973, post. 

eo Where the principal or master, 
as a mere matter of courtesy or ac- 
commodation, undertakes to do some 
service for another involving the em- 
ployment of a servant, the servant 
will usually remain the servant of 
the principal or master who so un- 



dertakes. If I offer to send a guest 
home in my carriage, or invite him 
to take a ride in it, the driver will 
usually remain my servant in so do- 
ing. The fact that the guest gave 
the general directions or chose the 
route would usually be immaterial. 
See Corliss v. Keown, 207 Mass. 149. 
If I send my servant to assist a guest 
or a friend, the servant, In so doing, 
will usually remain my servant. 
Performing the act of courtesy or 
friendship in such a case is clearly 
my business. On the other hand, 
where one person lends his servant 
to another to be used by the latter in 
the performance of his business and 
under his direction and control, 
the servant, while so employed, is 
usually the servant of the lat- 
ter, even though the former may 
continue to pay him. (It is, of 
course, necessary that the servant 
shall, expressly or impliedly, consent 
to the arrangement and put himself 
under the direction of the borrower.) 
Delaware, Lackawanna & Western 
R. R. v. Hardy, 59 N. J. L. 35; Hig- 
gins v. Western Un. Tel. Co., 156 N. Y. 
75, 66 Am. St. Rep. 537; Hasty v. 
Sears, 157 Mass. 123, 34 Am. St. Rep. 



1441 



i860] 



THE LAW OF AGENCY 



[BOOK iv 



Precisely the same situation may result where, instead of simply 
lending his servant to another, the master, with the servant's consent, 
hires him for a period to another person, not to perform any service 
in which his general master is interested, but simply to perform serv- 
ice for the latter as the latter's servant. 61 

One person may, moreover, as to some particular act or service, so 
far adopt as his own servant one who is regularly the servant of an- 
other person, as to make himself liable for the conduct of such servant 
in the performance of that act or service. 62 

-3flB 'J(li" 3d VKfft 13fho 'Jill "ililfw " 

267; Wood v. Cobb, 13 Allen (Mass.), 
58; Kimball v. Cushraan, 103 Mass. 
194, 4 Am. Rep. 528; Grace & Hyde 
Co. v. Probst, 208 111. 147; Philadel- 
phia, etc., Coal Co. v. Barrie, 102 C. 
C. A. 618, 179 Fed. 50; Parkhurst v. 
Swift, 31 Ind. App. 521; McCarthy v. 
McCabe, 131 N. Y. App. Div. 396; 
Rourke v. White Moss Colliery Co., L. 
R. 2 C. P. Div. 205; Murray v. Currie, 
L. R. 6 C. P. 24 (but compare 
Standard Oil Co. v. Anderson, 212 
U. S. 215); Donovan v. Laing, [1893] 
1 Q. B. 629 (but compare Union 
Steamship Co. v. Claridge, [1894] 
App. Gas. 185, where the general 
master did not relinquish control). 

See also Muldoon v. City Fireproof- 
ing Co., 134 N. Y. App. Div. 453; An- 
derson v. Boyer, 156 N. Y. 93; Calla- 
han v. Munson S. S. Line, 141 App. 
Div. 791; Western Un. Tel. Co. v. 
Rust, 55 Tex. Civ. App. 359. 

The same result was reached 
where, though the defendant did not 
loan his servant, the latter, without 
the knowledge or consent of defend-