Chapter III: Part I: Law in General (2)

Where two or more parties sign a contract, binding themselves to do one thing of a series of things, the law presumes the obligation to be joint. If the language used shows, that the parties singly, or individually bind themselves to do the thing, or series of things in common, the contract is several, as well as joint. _A_ owes _B_ three hundred dollars ($300.00) upon a promissory note. _C_, _D_ and _E_ sign the following guaranty:

If _A_ fails to pay the note when due, _C_ individually promises to pay _B_ one hundred dollars ($100.00), _D_ individually promises to pay _B_ one hundred dollars ($100.00), _E_ individually promises to pay _B_ one hundred dollars ($100.00).

As to each other _C_, _D_ and _E_, are severally liable. As to _B_,--_C_, _D_ and _E_ respectively are jointly and severally liable, with _A_ for one hundred dollars ($100.00) each.

=31. Discharge of Contract by Performance and Tender.= A contract is terminated, when the parties thereto perform its provisions. The liability of parties ceases by performance of the provisions of the contract. _A_ promises to construct a house for _B_, according to certain specifications, within a year. _B_ promises to pay _A_ five thousand dollars ($5,000.00), upon completion of the house according to contract. _A_, within a year, constructs the house according to the plans and specifications. _A's_ obligation is at an end. _B's_ obligation still requires him to pay _A_ five thousand dollars ($5,000.00), and he is liable to a suit for this amount until it is paid. When _B_ pays _A_ five thousand dollars ($5,000.00), his obligation and the contract are terminated, as to both parties.

Tender of payment is equivalent in law to payment. By _tender_ is meant an offer to pay in recognized legal money. _A_ has an option for the purchase of a house of _B_, for five thousand dollars ($5,000.00). _B_ desires to have the option lapse, having obtained a better offer. If _A_ offers _B_ legal tender before the option expires, the contract is complete in law.

United States statutes stipulate what constitute legal tender. These statutes provide that the following shall constitute legal tender:

1. Gold coin.

2. Silver dollars.

3. Subsidary silver coin up to ten dollars.

4. Nickels and pennies not exceeding twenty-five cents.

5. United States notes, except for duties on imports, and interest on public debts.

Silver certificates, bank notes and private checks are not legal tender.

=32. Discharge of Contract by Subsequent Agreement.= Contracts may be terminated by another contract, made after the contract in question has been entered into. For example, _A_ promises to construct, within one year, a house according to certain plans, for _B_. _B_ promises to pay _A_ five thousand dollars ($5,000.00), upon completion of the house. _A_ completes the excavation of the cellar and _B_ fails in business, and desires not to have the house constructed. He offers _A_ five hundred dollars ($500.00), for the work already done, and to release him from his obligation. _A_ accepts _B's_ proposition. The original contract has been terminated by the subsequent one.

=33. Warranty and Remedies for Breach of Warranty.= A _warranty_ is a contract collateral to the principal contract, by which a party to a contract specifically covenants certain things. Warranties apply especially to sales of personal property. (See _warranty_ under Sales of Personal Property.) _A_ promises to build a house for _B_ and warrants the paint to stand untarnished and uncracked for one year. The covenant on _A's_ part relating to the paint is a warranty.

Breach of warranty ordinarily does not entitle the other party to rescind the contract. That is, it does not permit him to refuse to carry out his part of the contract, but entitles him to bring an action for damages, for its breach.

=34. Recission and Discharge of Contracts by Breach.= If a party fails or refuses to carry out a provision of a contract, he is said to have committed a _breach of contract_. When one party to a contract commits a breach, the other party may accept the breach and sue for damages, or he may refuse to accept the breach and wait until the time for complete performance arrives, and then, if the other party has not performed, sue for damages.

When a party to a contract commits a breach, and notifies the other party of his refusal further to carry out the contract, the other party cannot increase the defaulting party's damages by continuing performance thereafter. For example, _A_ contracts with _B_ to have a fence finished and erected around _A's_ house. After _B_ has half of the fence manufactured and erected, _A_ refuses to go on with the contract. _B_ cannot increase the damages by manufacturing and erecting the balance of the fence. The reason for this is that it would not benefit _B_ at all, but would merely injure _A_. _B_ is entitled to recover his profit for the entire job, when _A_ breaks the contract. He could recover no more by manufacturing and erecting the balance of the fence.

The law does not recognize trivial things. A party cannot claim breach of contract for failure of the opposite party to a contract, to perform an unimportant thing. The law recognizes substantial performance as actual performance. This does not mean that a party cannot put such terms in a contract as he chooses, but means that, in the absence of any provisions of the contract to the contrary, a party is not presumed by law to contract for trivial things. Time of performance is an illustration of this principle. _A_ contracts with _B_ for the building of a house. _B_ promises to complete it in one year. If completed in one year and a day, there is a substantial performance, unless the contract expressly shows that the precise day of performance was regarded as important.

Where contracts provide for separate performances, a failure or refusal to fulfil one performance will not always amount to a refusal or failure to perform the balance. _A_ agrees to ship _B_ five thousand barrels of cement, in car load lots of one hundred and fifty barrels each to be shipped each week. _B_ receives and refuses to pay for the first car. This may not amount to a breach of the entire contract, so as to justify _A_ in refusing to ship the balance. The tendency of American courts, however, is to treat this as as one contract; that is to treat the promises as dependent, and not independent.

The acceptance by one party, of a breach of contract made by the other, and the refusal on the part of the former further to carry out the contract, is known in law as _recission_. To rescind a contract, a party must return what he has received thereunder, called putting the other party _in statu quo_. He must also accept the breach promptly. For example, _A_ promises to sell _B_ three horses to be delivered one each day, upon the three following days. _A_ delivers one and fails to deliver the second. To rescind the contract, _B_ must return promptly to _A_ the horse already delivered. He may then sue _A_ for damages suffered. If _B_ does not promptly return the horse to _A_, he must permit _A_ to go on with the contract, waiving the delay, or pay for the horse already delivered, less damages for _A's_ breach of contract.

=35. Discharge by Bankruptcy.= By a United States' statute, certain persons may become bankrupts and thereby be discharged from their obligations. By the terms of this act, the bankrupt's property is turned over to an officer, called a trustee in bankruptcy who disposes of it, and distributes it _pro rata_ among the bankrupt's creditors. Any person except a corporation, who owes debts, may become a voluntary bankrupt.

The United States statute further provides that certain persons may be declared bankrupts at the instance of their creditors. The United States statute provides that:

"Any natural person, except a wage earner, or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company and any corporation engaged principally in manufacturing, trading, printing, publishing, mining or mercantile pursuits, owing debts to the amount of one thousand dollars ($1,000.00) or over, may be adjudged an involuntary bankrupt, upon default, or on impartial trial and shall be subject to the provisions and entitled to the benefits of this act. Private bankers, but not national banks or banks incorporated under state or territorial laws may be adjudged involuntary bankrupts."

Any of the above enumerated parties may be made an involuntary bankrupt at the instance of creditors if he has committed an act of bankruptcy.

The bankruptcy statute defines an act of bankruptcy as follows:

"Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred concealed or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay or defraud his creditors or any of them; (2) transferred, while insolvent any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; or (3) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference; or (4) made a general assignment for the benefit of his creditors, or being insolvent, applied for a receiver or trustee for his property, or because of insolvency a receiver or trustee has been put in charge of his property under the laws of a state, of a territory, or of the United States; or (5) admitted in writing his inability to pay his debts, and his willingness to be adjudged a bankrupt on that ground."

Bankruptcy discharges a bankrupt from his contracts.

=36. Remedies for Breach of Contract.= Originally, at common law, there was no power given a party to a contract, to compel the other party specifically to perform the provisions of the contract. For example, _A_ promises to pay _B_ one thousand dollars ($1,000.00) for one thousand bushels of wheat, to be delivered within ten days. _B_ fails and refuses to deliver the wheat. _A_ could not at common law, and cannot under the present rules of law, compel _B_ to deliver the wheat. _A's_ remedy is an action for damages. _A_ may go into the market at the time and place of delivery, provided for in the contract, and purchase one thousand bushels of wheat of the quality provided for in the contract, and collect as damages from _B_ the advance in price, if any, together with expenses connected therewith. If _A_ is obliged to pay one thousand five hundred dollars ($1,500.00) for the wheat, which by the terms of the contract, he had purchased for one thousand dollars ($1,000.00) from _B_, he may recover five hundred dollars ($500.00) damages from _B_. If _A_ succeeds in obtaining the wheat for nine hundred dollars ($900.00), he can only recover nominal damages from _B_, commonly five cents, for breach of contract. In case _A_ obtains the wheat for nine hundred dollars ($900.00), _B_ cannot recover one hundred dollars ($100.00) from _A_, since he has violated the contract, and cannot take advantage of his own wrong.

Parties frequently fix the amount of damages for a possible breach at the time the contract is made. This is known in law as _liquidated_ damages. If reasonably compensatory, the courts will recognize and enforce liquidated damages; if clearly unreasonable they are regarded as penal, and the courts will not enforce them. For example, _A_ agrees to construct a rolling mill for _B_, for fifty thousand dollars ($50,000.00), and to complete the structure within one year, and to pay damages of two hundred dollars ($200.00) per day, for each and every day consumed, in excess of a year in finishing the structure. If this is a reasonable loss to _B_, for the failure to have the use of the mill, the courts will enforce the provisions; otherwise they will remit the excess over the fair value of _B's_ loss.

=37. Equity and Specific Performance.= Originally, at common law in England, the king and his subordinates heard suits. Certain specified actions or remedies, only, were allowed. It was soon observed that many complaints were made, and disputes arose, which did not come within the scope of these common law actions. The king appointed a chancellor to assist him. It was the duty of the chancellor to hear disputes, not within the scope of the recognized common law action, and to determine and decide these upon equitable principles. This court became known as the court of _chancery_, or court of _equity_. A regular system of courts of chancery grew up in England, with fixed rules of procedure and of recovery. This country has Courts of Equity. In many states, the same judge sits as a court of law, and of equity. Equity does not hear cases where there is a complete and adequate remedy at law. Equity courts have a judge only, and no jury. Courts of equity sometimes specifically enforce contracts in case there is no adequate remedy at law. For example, _A_ purchases a lot of _B_ in a particularly desirable locality. There is no other vacant lot near it. In case _B_, refuses to carry out his contract, by conveying this lot to _A_, equity will compel _B_ to convey the lot to _A_. Here _A_ has no adequate remedy at law. Money damages will not enable him to procure what he contracted for.

Specific performance is rarely granted in case of sales of personal or chattel property. There are a few exceptions. If _A_ purchases "Maud S." from _B_ for ten thousand dollars ($10,000.00), "Maud S." being a two minute race horse, purchased for breeding purposes, and _B_ refuses to deliver her, a court of equity might grant specific performance. Money damages might not enable _A_ to purchase a similar horse. The same principle applies in case of purchases of rare works of art.

While a contract for personal services cannot be specifically enforced by a court of equity, some relief may be granted by injunction. For example, _A_, an actress, agrees to perform for one year for _B_ and later refuses. While a court manifestly cannot compel _A_ to perform for _B_, it will by injunction prevent her performing for others.

=38. Forms of Contracts.= The following is a form of simple contract.

Chicago, Ill., June 23, 1909.

Contract entered into this.... day of........ 1909, by and between _A_, the first party, and _B_, the second party.

In consideration of the promises hereinafter made by the second party, the first party agrees........ (here state first party agreement).

In consideration of the promises of the first party, the second party agrees........ (here state agreement of second party).

Signed............. First Party.
Signed............. Second Party.

The following is a form of a formal contract.

Articles of agreement entered into in New York City this.......day of.... 190-by and between _A_, hereinafter designated as the first party, and _B_, hereinafter designated as the second party.

Whereas, the first party is a wholesale dry goods merchant having a place of business in New York City, and is desirous of employing a traveling salesman, and whereas, the second party is a traveling salesman having had ten years' experience in the dry goods business, now, therefore in consideration of the promises hereinafter made by the second party the first party agrees,

First. To pay the second party the sum of $2400 in installments of $200 payable each month for a period of 12 months.

Second. To pay the second party's traveling expenses not to exceed $50.00 per week, to be mailed weekly as ordered by second party.

Third. To furnish second party a full line of samples.

In consideration of the promises of the first party the second party agrees,

First. To devote his entire time and attention to the business of selling goods of the first party.

Second. To furnish lists of customers called upon each day, said lists to be mailed to said first party, New York address, each evening.

Third. To waive his right to any salary in excess of his traveling expenses if his sales do not average $5000 per week.

In witness whereof the parties have affixed their names and seals in duplicate the day and year above written.

.............First Party.
.............Second Party.

PRINCIPAL AND AGENT

=39. In General.= _Agency_ is the term applied to the legal relation existing between persons who transact business or perform duties through representatives. Few duties are performed, and few business transactions are completed solely through the personal efforts of the interested parties. Most business dealings are completed in part, at least, by representatives or agents. Much important business is transacted by corporations. Corporations must act through agents. They have no identity apart from officers and agents. Individuals, as well as the smaller business concerns, perform many of their duties and make many of their contracts through representatives or agents. The law relating to agency, next to the law of contracts is probably the broadest as well as the most important branch of commercial law. Its application is almost universal. A distinction is sometimes drawn between representatives appointed to make contracts with third persons, and representatives appointed to perform menial or mechanical work, by calling the one class, agents, and the other servants. There is little reason for any such distinction. The same rules of law apply to both agents and servants. The principal distinction is in the nature of the service, which need not be considered in discussing the general legal principles.

The party appointing another to represent him in his relation to third persons is called the _principal_. The person appointed to act as a representative is called the _agent_. The legal relationship existing between the principal and the agent, and the principal, agent and third person, constitutes the _law of agency_. If a dry goods merchant, _A_, employs _B_, a traveling salesman, to sell his goods, and _B_ sells goods to _C_, _A_ is the principal, _B_ the agent, and _C_, the third person contracting with _A_, through _A's_ agent _B_.

=40. Who May be a Principal.= A principal is one who appoints an agent. _A_, employs _B_ to deliver goods; _A_ is principal and _B_ agent. Any person, natural or otherwise, competent to enter into a contract, may enter into a contract through an agent. There is one possible exception to this rule. It is a well recognized rule of law that an infant cannot appoint an agent. An infant may enter into a contract which is not void at law, but which is merely voidable. (See subject, "Infant" in Chapter on Contracts.) That is, an infant may lawfully make and carry out a contract. The law does not prohibit it. But the law will not compel an infant to carry out his contracts, except for necessaries. When it comes to the appointment of an agent, however, the law refuses to give an infant this power. By an infant is meant a person under legal age.

Any person of legal capacity may appoint an agent. In other words, a person may do through an agent the things he, himself, may do. An insane person, an idiot or a drunken person cannot appoint an agent. A corporation may do business through agents, limited only by its corporate capacity. A partnership may do business through agents, limited only by the purposes for which the partnership is formed.

=41. Who May be an Agent.= Any one, except a very young child and persons whose interests are opposed to those of the principal, may act as agent. A child may be employed to deliver goods, and thus make and complete contracts for his principal. Persons of unsound mind may serve as agents. Persons who cannot act as principal, through lack of capacity to contract, may act as agent for others. For example, _A_, fourteen years old, cannot be bound by a contract with _B_ for the purchase of one hundred bushels of wheat, but _A_ may be employed as agent by _C_, a competent person, to purchase of _B_ one hundred bushels of wheat.

A person whose interests are opposed to those of his principal is disqualified from acting as agent. That is, a person cannot be agent for both parties to the same transaction. For example, if _A_ is employed as traveling salesman by _B_ to sell goods, he cannot serve as agent for _C_ in the purchase of goods from _B_ without the knowledge and consent of both _B_ and _C_.

Artificial persons, such as partnerships and corporations, may act as agents. It is usually held that children under seven years of age cannot act as agents, by reason of tender age.

=42. How Agents May be Appointed.= Agents may be appointed by any act of the principal which shows that it is the principal's will that the agent shall act as the principal's representative.

Agents may be appointed by oral statement, by written document, by conduct on the part of the principal, or by ratification of an unauthorized act.

Most agencies are created by oral authority. Any word by which the will of the principal is manifested is sufficient. _A_ tells _B_ to order a barrel of flour from _C_. This constitutes _B_ an agent for _A_. _B's_ asking _A_ if he shall order a barrel of flour from _C_, to which _A_ nods, constitutes _B_, _A's_ agent. _A_ writes to _B_ and requests him to order a carload of flour from _C_. This constitutes _B_, _A's_ agent. _B_, without any authority from _A_, orders a car load of flour from _C_, which _A_ accepts, and for which he promises to pay. This constitutes _B_, _A's_ agent by ratification.

Some few contracts of agency must be in writing. _A_ employs _B_ to act as his salesman for a period of two years. As between _A_ and _B_, the contract is not enforceable, by reason of the _Statute of Frauds_ (see Statute of Frauds, chapter on Contracts). But as between _A_ and third parties dealt with by _B_ as agent, _A_ cannot refute the agency.

Some contracts which must be made in writing, such as land contracts require the agent's authority to be in writing.

If a person knowingly permits another to act as his agent, he cannot afterwards repudiate the agency. For example, _A_ stands by and watches _B_ sell _A's_ horse to _C_. Although _B_ had no authority to make the sale, _A_, by his conduct, cannot claim there was no agency.

An agent's assertion of agency does not of itself constitute an agency. If _A_, without _B's_ knowledge, claims to _C_ to have authority to sell _B's_ horse and does attempt the sale, title to the horse does not pass to _C_, because _A_ had no authority to make the sale. A mere declaration of authority on the part of the agent without the knowledge or consent of the principal does not create an agency.

=43. Purposes for Which an Agency May be Created.= With the exception of fulfilling contracts for personal services, a person may do, through an agent, anything he may lawfully do by himself. For example, _A_ employs _B_, an artist of fame, to paint a picture. Manifestly _B_ cannot employ a student or another artist to paint the picture. _A_ contracted for _B's_ personal skill and work, and cannot be made to accept the work of another. In the majority of business transactions, however, the personal element does not enter. The thing to be done, or the article to be furnished, is the feature of most contracts. By whom the thing is done, or by whom the article is furnished, does not matter. For example, _A_ purchases one hundred bushels of wheat from _B_. _B_ delivers the wheat through his agent. Ordinarily _A_ cannot, nor does he wish to complain. _A_ contracts with _B_ to have _B_ furnish him an oak chair of given dimensions. _B_ employs _C_ to make and deliver the chair. _A_ cannot complain so long as the chair corresponds to the terms of the contract.

A party cannot do through another what he himself cannot lawfully do. For example, a party cannot employ an agent to purchase votes for him. Neither can a person lawfully corrupt legislators by means of an agent, nor lawfully commit a crime by means of an agent.

=44. Ratification of Agency.= Where a person assumes to act as an agent for another without authority, or in performing an agency, exceeds his authority, he does not bind the person for whom he assumes to act, unless such person subsequently, with knowledge of the fact, consents to be bound thereby. Such assent is known in law as _ratification_.

A person cannot ratify an act which he, himself, has no power to perform. For example, _A_, pretending to act for _B_, offers _C_, a legislator, one hundred dollars ($100.00) to vote against a certain measure. _B_ cannot ratify this act, since he himself cannot lawfully perform it. If however, _A_, knowing that _B_ desires a certain rare picture, finds it and orders it in _B's_ name, _B_ may ratify the act by accepting and paying for the picture.

In Center of Central Circular Desk, is the Housing for the Book-Handling Machinery. Card Catalogue in Foreground. View Facing Entrance. The Corinthian Order has been Used.]

Much discussion has arisen as to the ability of a person to ratify a forgery of a negotiable instrument. The courts differ on this question. It is, however settled that in case of a forgery, if the alleged principal fails to deny the signature when the paper is presented to him, or by remaining silent, induces another to purchase it, or to injure his position by reason thereof, the alleged principal is estopped from further denying the authenticity of the signature, and may be compelled to pay the instrument. For example, _A_ forges _B's_ name to a promissory note payable to _C_. _C_ presents the note to _B_ for payment. _B_ may refuse to pay the note by reason of forgery. If, however, _A_ forges _B's_ name to a note, payable to _C_, and _D_ shows _B_ the note, saying that he is about to purchase it if it is genuine, and _B_ remains silent and permits _D_ to buy the note, _B's_ silence amounts to a ratification of the forgery and he must pay the note to _D_.

When an alleged principal's attention is called to the fact that an alleged agent has assumed to act as his agent, he must choose between repudiating the act and accepting it. This choice is known in law as the principal's _right of election_.

=45. Classification of Agents.= Agents are usually classified as _universal_, _general_ or _special_. By universal agent is meant an agent empowered to represent his principal in every capacity. A principal could have only one universal agent. In business affairs, a universal agency is seldom, if ever, found. It is useful, however, as a classification to show the different kinds of agents, depending upon the degree of their authority.

A general agent is one authorized to perform all the duties of his principal of a certain kind. _A_, an insurance company, appoints _B_ its sole agent to solicit insurance in the city of Boston. _B_ is a general agent for the purpose of soliciting insurance in the city of Boston. General agencies are common in business practice.

A special agent is one authorized to act for his principal in a particular matter or transaction. For example, _A_ employs _B_, an attorney, to try a certain law suit. _B_ is a special agent.

In practice it is not always easy to determine whether an agent is a general or a special one. A principal does not always limit his agent's powers by actual authority conferred upon the agent. His intention and his instructions to the agent may limit the latter's authority, but third persons may rely upon the apparent authority of the agent, rather than the actual. For example, _A_ employs _B_ as a traveling salesman to sell dry goods. He instructs _B_ not to sell any bills less than five hundred dollars ($500.00) in amount. _B_ sells _C_ a bill amounting to four hundred dollars ($400.00), _C_ does not know of the limitation of _B's_ authority. _A_ is bound by _B's_ sales to _C_. _C_ has the right to rely upon _B's_ apparent authority. _A_ has given _B_ actual authority to sell goods, and this authority carries with it the implied or apparent authority to sell in any reasonable amounts.

Actual authority to do certain things carries with it the right to do those things which impliedly, or from custom or usage apparently accompany the authority conferred.

Third persons dealing with an agent must, on the other hand, ascertain at their peril that an agent has the authority claimed. For example, if _A_, without authority, claims to be agent for _B_, and sells an order of goods to _C_, and collects from _C_ a certain amount, when in fact he is not the agent of _B_, _C_ has no contract with _B_. A third person dealing with an agent must ascertain at his peril, that the alleged agent has authority from his principal to act as agent in a certain capacity. When this is ascertained, the third person has a right to treat the agent as having the authority to do all the things necessarily or customarily belonging to his agency.

=46. Duties of Principal to Agent.= The relation of a principal to his agent arises out of a contract, express or implied. The contract may expressly provide that the agent is to receive a specified sum for his services. In this event, the principal is legally liable to pay this amount to his agent. The principal may have a defense to his contract, the same as to any contract. But if the agent has performed his contract of agency, he can enforce payment therefor. For example, _A_ employs _B_ to sell furniture for a compensation of one hundred dollars ($100.00) per month and expenses, the contract to cover a period of twelve months. When _B_ performs this service, he may, by legal action, compel _B_ to pay him one thousand two hundred dollars ($1,200.00). If _B_ fails to work for _A_ as provided for by the terms of the contract, and at the expiration of six months enters _C's_ employ, in most jurisdictions, he can recover nothing from _A_, since he has not fulfilled his contract. In some jurisdictions, he may recover from _A_ the value of his services, less the damages _A_ has suffered by reason of breach of contract.

Many agencies are created without any express provision as to compensation. In this event, a contract relation exists, as much as in the former case. There is an implied contract that the agent shall receive a reasonable compensation for his services. For example, _A_, a contractor, requests _B_, a teamster, to haul stone for the construction of a bridge. _B_ works for _A_ a week, nothing having been said as to compensation. _B_ can recover from _A_ the reasonable and customary value of his services.

There is also a duty on the part of the principal to protect his agent against unnecessary risks of injury. There is a duty on the part of a master to protect his servant. An agent or servant assumes the risks which naturally belong to the kind of work in which he is engaged. For example, _A_ employs _B_ to work in a saw mill. _B_ assumes the risks incident to the employment. If a log accidentally rolls on him, _A_ is not liable in damages, or if _B_ carelessly cuts his hand on the saw, _A_ is not responsible. But if the boiler explodes through carelessness of _A_, or if the saw flies to pieces on account of wear, and injures _B_, _A_ is liable.

It is said that a principal or master is obliged to furnish his agent or servant with a reasonably safe place in which to work, and with reasonably safe tools and instruments with which to work. If the principal negligently fails to these things, and the servant is injured without negligence and carelessness on his part, the principal is liable to him in damages for any injuries.

=47. Duties and Liabilities of Principal to Third Persons.= When a person employs another to act for him, he is liable to third persons for the acts performed by the agent, so long as the agent acts within his authority. If _A_ appoints _B_ his agent to purchase live stock, _A_ must pay third persons for the live stock purchased in his name by _B_. A person employing another to act as his agent is responsible to third persons for acts performed by the agent, which are within the apparent authority of the agent, as well as for the acts which are within the actual authority. If _A_ appoints _B_ his agent to purchase live stock and instructs him to purchase only hogs, but limits his authority to pay over five cents per pound, and _B_ purchases at five and a half cents from _C_, who does not know of this limitation, _A_ is bound by the contract. In giving an agent authority to do certain things, the agency carries with it the customary or implied authority to perform those acts incident to the general character of the agency. Thus, authority to purchase usually carries with it authority to fix the price. This is especially true of authority to sell.

Notice to an agent is notice to a principal. If an agent is authorized to sell goods, and in making a sale, is notified by the purchaser that the goods are purchased conditionally, in the absence of any special instruction limiting the power of the agent to sell conditionally, brought to the attention of the purchaser, the principal will be bound by the condition.

A principal is liable to third persons for his agent's torts or wrongful acts. If _A_ directs his agent _B_ to destroy _C's_ property, _A_ is liable to _C_ for the damage done. A principal is not only liable to third persons for the damages done under his express direction by his agent, but he is also liable for the acts carelessly done by the agent in the course of his employment. A street car company employs _B_ as motorman. _B_, carelessly and negligently, while operating a car runs over _C_. _A_ is liable for _B's_ negligent act. A principal, however, is not liable for the wrongful acts of his agent, performed outside of his employment. _A_, a street car company, employs _B_ as conductor; _C_, standing on the street insults _B_. _B_ stops his car, gets off and assaults and injures _C_. _A_ is not liable, since _B_ did not commit the act complained of while in the course of his employment, but went outside the course of his employment and acted on his own behalf.

=48. Duties and Liabilities of Agent to Principal.= An agent must obey the instructions of his principal. If he disobeys his instructions, he is liable to his principal for losses sustained. For example, if _A_ employs _B_ to sell flour at four dollars ($4.00) per barrel and _B_ sells one hundred barrels at three dollars and seventy-five cents ($3.75), he must respond in damages to _A_ for twenty-five cents a barrel. If, however, a discretion is given the agent, and he makes a reasonable mistake in using his discretion, he is not liable. If his instructions are not clear, and he carries out what he thinks are his instructions, which prove not to be the desire or intention of his principal, he is not liable.

An agent must account to his principal for money collected, and for moneys or property coming into his possession by reason of his agency. If he deposits money in his own name and it is lost through a bank failure, he is responsible to his principal. If he carefully deposits it in the name of his principal and the bank fails, he is not responsible.

An agent must act carefully in the performance of his principal's work, or as it is usually said, he must not act carelessly or negligently. He must act as a reasonably prudent man would act, under similar circumstances, or be liable to his principal in damages.

An agent must be loyal to his principal's interests. He cannot act secretly for another. He cannot act secretly as agent for both parties to a transaction. If he makes profits in his agency dealings, he must account for them to his principal. _A_ employs _B_ to sell Christmas novelties. _B_, shortly before Christmas receives a large order from _C_, who offers _B_ one hundred dollars ($100.00) in excess of the regular price, if the goods arrive the following day. _B_ succeeds in having the goods reach _C_ the following day. _B_ must account for the extra one hundred dollars ($100.00) to _A_, his principal.

An agent must faithfully carry out his agency. He is responsible for failure to act loyally. _A_ employs _B_ to sell butter. _B_ obtains an offer from _C_, a rival butter manufacturer, to commence work for him on commission two weeks hence. _B_ tells his customers not to purchase for two weeks, at which time he can make them a better price. _B_ is liable to _A_ in damages for this act of disloyalty. He has broken his contract.

An agent, who is employed to perform personal services, cannot transfer his responsibility or agency to another.

One who agrees to act as agent for another without compensation, cannot be forced to fulfil his agency. He is not liable in damages to his principal for failure to act, but if he chooses to act without compensation, he is liable if he acts with great negligence. If _A_ requests _B_ to drive his horse home and _B_ drives the horse and leaves him without tying him, and the horse runs away and destroys the carriage and ruins himself, _B_ is liable for gross negligence.

=49. Rights and Liabilities of Agent to Third Persons.= An agent acting within the scope of his authority, in making contracts with third persons, binds his principal by the contract, but does not bind himself. _A_ is authorized by _B_ to purchase a horse. A purchases a horse from _C_, notifying _C_ that he is purchasing as agent for _B_. _C_ must look to _B_ for the purchase price, since _A_ acted solely as agent and is not personally liable under the contract.

If an agent, intending to act as agent, makes a contract in his own name, without informing the third party with whom he is dealing, of the agency, he binds himself. Under these circumstances, he usually binds his principal also. This question is discussed more at length under the title "Undisclosed Principal." If _A_ is employed by _B_ to purchase a horse, and _A_ purchases a horse from _C_ for two hundred dollars ($200.00), without telling _C_ of the agency, the purchase price to be paid the following day, _A_ binds himself personally to pay _C_ the two hundred dollars ($200.00) and _C_ is not obliged to look to _B_ for payment.

If an agent, honestly believing he has authority to act as agent when he has not, makes a contract as agent for his supposed principal, he binds himself personally and not his principal. _A_ writes to _B_, "Purchase for me _C's_ bay team, if same can be secured for two hundred and fifty dollars ($250.00), half payable in six months." _B_ reads the letter and purchases the team in the name of _A_ for two hundred and fifty dollars cash ($250.00), overlooking the condition in _A's_ letter that half was to be paid in six months. _B_ binds himself to _C_ and does not bind _A_.

When an agent falsely or fraudulently represents himself as agent, he binds himself and not his alleged principal.

If an agent, honestly believing he has authority to act, does not have such authority, but discloses all the facts connected with his authority, to the third person with whom he is dealing, he is not personally bound. _A_, having previously acted as agent for _B_, in purchasing onions by the crate, receives the following wire from _B_, "Purchase one hundred crates, ship at once." _A_, supposing this refers to the purchase of onions, shows the telegram to _C_, and tells him that in the only other transaction in which he acted for _B_ he purchased onions, and that he supposes this wire refers to onions. He purchases one hundred crates of onions from _C_, and later discovers that _B_ intended turnips, instead of onions. _A_ is not bound personally. He has acted honestly and revealed all the facts in his possession to _C_, who must act at his risk as to _A's_ actual authority.

=50. Undisclosed Principal.= A principal, whose agent deals with a third person for his benefit, without disclosing the name of his principal, or perhaps without disclosing the fact of agency, is said to be an _undisclosed principal_. For example, _A_ employs _B_ to purchase one hundred crates of oranges. _B_ purchases the oranges from _C_ for _A_ in his own name, not telling _C_ that the purchase is made for _A_. In this case, _A_ is an undisclosed principal.

As a general rule an undisclosed principal, when discovered, is liable upon the contract of his agent.

In case of an undisclosed principal, the agent is liable personally as well as the undisclosed principal. If _A_ instructs _B_ to purchase for him five cars of coal, and _B_ purchases the coal of _C_ in his own name, without disclosing the fact of his agency, _B_ is personally liable to _C_ for the purchase price.

The undisclosed principal is not liable to a third party if the third party with full knowledge of the agency, elects to hold the agent. If _A_ employs _B_ to purchase goods for him, and _B_ purchases the goods in his own name from _C_, and _C_, before payment, learning that the goods were purchased for _A_, elects to hold the agent _B_, by suing him for the purchase price, or by doing or saying anything that shows his determination to hold the agent, rather than the principal, he cannot thereafter hold _A_.

The undisclosed principal may enforce against third persons the contract of his agent. If _A_ employs _B_ to purchase goods from _C_ and _B_ makes the purchase in his own name for future delivery, _A_ may compel _C_ to deliver the goods to him. This rule applies in all cases where the third party is not injured by its application.

The liability of an undisclosed principal to third persons, upon contracts made by an agent in the agent's name, is subject to the further exception, that when the third party has led the undisclosed principal to believe that he is looking to the agent alone for fulfillment of the contract, and relying upon such conduct the undisclosed principal settles with the agent, he is no longer liable to the third party. In this event the third person is said to be estopped from the right to sue the undisclosed principal. This rule is based upon equitable reasons. There can be no such thing as undisclosed principal in case of a negotiable instrument. No one is liable on a negotiable instrument, such as a note, draft, or check, except the maker, indorser, drawer or acceptor.

=51. Apparent Authority of Agent.= While it is true that an agent must have authority from his principal, before he can bind his principal in the capacity of agent, and while it is equally true that third persons, in dealing with agents, must determine at their peril that the agent has actually received authority to act for his principal, a third party has the right to rely upon the implied and customary powers accompanying an actual authority conferred upon an agent. Few contracts are made express in all their terms. Language is not susceptible of such nicety. In the express or implied contracts used in creating agencies, many things are implied. A third person dealing with an agent, is not limited by the actual authority conferred upon the agent by his principal, if the character of the authority apparently confers other customary or implied powers. Third persons are said to have the right to rely upon the apparent rather than upon the actual authority of the agent. This does not mean that an agent can create an agency and bind his principal without having received any authority from his principal to act as agent, but means that where an authority of a certain character has been conferred upon an agent, third parties dealing with the agent, have a right to rely upon the apparent or customary powers conferred, rather than upon any secret or unexpected limitations upon such authority. For example, an agent has authority to sell silk goods and to make exchanges in silk. This authority is printed on the order sheets furnished the agent. The agent exhibits these order sheets to the customer and exchanges are made. The principal cannot claim that the agent had authority to exchange only goods of the principal's manufacture. The authority conferred upon the agent to make exchanges, apparently was to make exchanges of any silks. The principal cannot complain if third parties rely upon the apparent authority.

=52. Secret Instructions.= So long as the agency is legal, a principal may create an agency of as limited an extent, or of as broad a nature as he desires. So long as the limitations which the principal places upon his agent's authority are not of a nature to mislead third persons, the agent cannot bind his principal by exceeding these limitations. But if a principal confers an authority upon an agent which impliedly embraces a number of powers, the principal cannot limit these powers by secret instructions. The limitations upon an agent's apparent authority must be brought to the attention of the third party. For example, _A_, a wholesale dry goods dealer, may employ _B_, a salesman, to take written orders only. If _B_ attempts to take oral orders, the principal, _A_, will not be bound thereby. But if _A_ gives _B_ authority to take written orders only, and secretly instructs _B_ to take no order less than fifty dollars ($50.00) in amount, or in excess of two thousand dollars ($2,000.00), and _B_ takes _C's_ order for forty-five dollars ($45.00), _C_ not knowing of this limitation, _A_ is bound. If, however, _A_ instructs _B_ to take only written orders, and in amounts ranging only from fifty dollars ($50.00) to two thousand dollars ($2,000.00), and prints these conditions plainly upon the order blank, _C_, in signing one of these order blanks for forty-five dollars ($45.00), does not bind _A_. In this case, _A_ has placed the limitation of _B's_ authority in _C's_ possession.

=53. Wrongful Acts of Agent.= An agent is personally responsible for wrongful acts committed. The fact that he acts in a representative capacity, does not excuse him from committing wrongs, nor does it relieve him from personal liability therefor. The principal, as well as the agent, is liable for the wrong committed, if authorized. If _A_ instructs his agent, _B_, to sell goods by fraudulent representations and _B_, by means of said fraud, sells goods to _C_, _B_ personally, as well as _A_ is liable to _C_, for the wrongful act. In the language of the courts, an agent is liable to third parties for _malfeasance_, but not for _misfeasance_. That is, an agent is liable to a third party for wrongful acts done, but is not liable to third parties for mere failure to observe the terms of his agency. In the latter case, he is liable to his principal only.

=54. Delegation of Authority and Subagents.= Where personal judgment and discretion are required of an agent, he cannot transfer his duties to another, without the consent of his principal. _A_, a wholesale dry goods merchant, employs _B_, an experienced traveling salesman, to sell goods. _B_, by his contract, is bound to give his personal skill to _A_ and cannot employ _C_ to act as salesman for him. _A_ presumptively employs _B_ to use his own skill and judgment. _B_ is not permitted to delegate his authority to another.

Where, however, mere mechanical or ministerial work is to be performed the agent is permitted to employ others to assist him, or to perform the work. For example, _A_ employs _B_, an expressman, to carry his trunk to the depot. _B_ may employ a boy to assist him in performing the work, or may employ another to perform the work. Usage and custom have much to do in determining whether or not an agent is permitted to delegate his authority. The performance of a mere ministerial duty may be delegated. _A_ employs _B_ to act as stenographer in reporting the trial of a case. When it comes to writing out the testimony, _B_ may perform the task himself, or delegate it to another.

When an agent employs a subordinate, or delegates his authority to another on his own responsibility, the agent stands as principal for the sub-agent, and the original principal is not responsible to third persons for the acts of the sub-agent. If, however, the agent is authorized by the principal to appoint a sub-agent, the agent is bound only to exercise care in the selection of such sub-agent, and the original principal is liable to third persons for his acts. The sub-agent is answerable to the principal, and not to the agent for his acts. For example, _A_, a florist, employs _B_ to deliver a box of flowers. _B_ employs _C_. The nature of the duty is such that _B_ may delegate it. But if _C_ is negligent in the performance of the work, _B_ is liable to _A_ for the negligence, for the reason that _A_ did not expressly or impliedly direct _B_ to employ another.

_A_, in Chicago, deposits for collection, a check drawn on a New York bank. _A_ knows that it is the custom of bankers to employ other banks for the purpose of making collections. If the Chicago bank uses due care in selecting another bank to assist in making the collection, and this bank makes the collection and fails before the Chicago bank receives the money, _A_ must stand the loss, and not the Chicago bank. _A_ authorized the employment of a sub-agent. There is some conflict of authority on the legal question involved in the above example.

=55. Agent's Authority to Collect.= An agent authorized to solicit orders is not thereby authorized to make collections on such orders. If, however, the agent is entrusted with the goods, and delivers them at the time the sale is made, he is authorized to receive payment therefor.

An agent authorized to sell, is not authorized to exchange or trade goods. He is authorized to make sales for cash only. If he accepts checks, or sells on credit, he is personally liable for losses. There is a tendency at present to permit the agent to accept checks in payment. The custom of making payment by check is so well recognized in many lines of business, that in some transactions it impliedly gives an agent this authority. This was not formerly the rule, and is still disputed by many courts.

=56. Agent's Signature to Written Instruments.= The proper method for an agent to employ in signing a written instrument, as agent, is to describe himself as agent for his principal in the body of the instrument, and then sign his principal's name at the end thereof, by himself as agent. For example, if _A_, is agent for _B_ in making a contract of sale, the body of the instrument should state that "_B_ by _A_, his agent, agrees," and the signature should be

(_B_..............)
(by _A_, his agent)

If the contract is merely signed "_A_, agent," the agent probably binds himself only. This is especially true in case of sealed instruments, such as deeds. In case of promissory notes, an agent who has authority to make such instruments, may make them in the name of his principal without using his own name at all. The more common form, however, is to sign the principal's name, per the agent as agent, or to sign the agent's name as agent for the principal, giving the principal's name. The mere signing of the agent's name as agent is a mere description, and probably binds the agent and not the principal. For example, if _A_ is agent and _B_ the principal, a promissory note executed by the agent should be signed

(_B_..............)
(by _A_, his agent)

A simple contract should state in the the body of the instrument that _A_, as agent for _B_, is making the contract, and the contract should be signed

(_B_..............)
(by _A_, his agent)

or _A_, agent for _B_. A promissory note or simple contract made and signed in the name of the principal, the agent's name not appearing, is probably binding, but it is not good business practice. The exact condition of affairs should be shown, and the name of the agent, as well as that of the principal, should appear in the document.