128. Agents following customary calling. Some forms of agency are so well established and have been so long practiced that they have gathered a considerable body of customs in conformity with which such agencies are conducted. A few of these will be briefly considered.

1. Factors. Factors or commission merchants are agents whose regular business it is to receive consignments of goods and sell them for a commission or percentage. The principal is bound by the customs of the calling. These customs have been adopted in order to protect innocent purchasers who are unable to know whose goods the factor is selling or what instructions the owner may have given. The factor may sell at any price, for cash or credit, warrant the goods if such goods are customarily sold with a warranty, and may take negotiable instruments in a sale on credit. He cannot barter the goods. At common law he cannot pledge them for his own debt, but under the Factors Acts an innocent pledgee is protected.

2. Brokers. Brokers are agents whose regular business it is to make contracts without having possession of the goods, or to negotiate for the purchase of property, or for loans, or for insurance, and the like. A merchandise broker who sells goods has less apparent authority than a factor because he has not possession of the goods. He cannot receive payment; he cannot usually warrant the goods; custom may permit a sale on credit, but the custom in this respect is not so broad as in the case of factors.

3. Auctioneers. Auctioneers are agents whose business it is to sell property publicly to the highest bidder. Until the fall of the hammer he is the agent of the seller; after that he is also agent of the buyer so as to enable him to make the note or memorandum required by the Statute of Frauds. He must sell for cash, and not, unless specially authorized, on credit or for other goods or for negotiable paper. He may receive payment. He cannot warrant unless specially authorized, nor can he rescind the sale when once made.

4. Attorneys at law. An attorney at law is an agent whose business it is, as a duly qualified officer of the court, to represent

his principal in the conduct of litigation or other legal proceedings. He has implied authority to control the proceedings, but he cannot compromise or release his client's claim or give up any substantial right of his client unless specially authorized. He may receive payment in full and give a release. He is bound to the highest good faith toward his client, and is liable to the client for the negligent management of the affairs intrusted to him.

5. Bank cashiers. A bank cashier is the chief executive officer of a bank. Tellers and other subordinate officers are under his control. He has power to draw checks or drafts upon the funds of the bank deposited with other banking or trust companies; to indorse and transfer for collection, discount, or sale the negotiable paper or other securities owned by the bank; to certify checks drawn upon the bank by depositors; to collect moneys due the bank; to borrow money and to loan money.

129. Undisclosed principal. An agent in making a contract may do so in his own name without disclosing to the third party that he is in fact acting for a principal. Factors usually make contracts in this way. In such cases the agent is always liable, but the principal may be also. Conversely the principal may enforce such a contract against the third party.

I. General rule. Subject to some exceptions, an undisclosed principal is liable to third parties with whom an authorized agent has dealt within the scope of the agency, in the same way and to the same extent as a disclosed principal, although the third person supposed he was dealing with the agent as principal.

The rule works both ways. An undisclosed principal may claim the benefits of a contract made by his agent in the course of the agency.

Examples: 1. A business is conducted in the name of A, who buys goods of X. Later X discovers that P owns the business. X may recover the price of the goods from P.

2. A business is conducted in the name of A, who sells goods to X. The owner, P, may recover the price of the goods from X.

2. Exceptions. To these rules there are some exceptions, and a few of them may be noted.

(a) If the principal or the third party has in good faith settled his account with the agent, he is no longer liable.

Examples: 3. If A conducts P's business in his own name and buys goods of X, and A and P have an accounting which includes this item, X cannot afterwards sue P.

4. If under like circumstances A sells goods to X, and X has paid A or otherwise settled with him, P cannot afterwards sue X..

(b) In contracts under seal only the parties named in the contract can sue or be sued, and hence an undisclosed principal could neither sue nor be sued upon such a contract.

Example 5. A sealed instrument is signed " A. B., C. D., E. F., Trustees of the X Church." The church is not liable. The instrument should be signed "The X Church, by A. B., C. D., E. F., Trustees." Had this been a simple contract (not under seal), the church could have been sued upon it.

(c) In negotiable instruments, only the party named as maker, drawer, or indorser can be sued. Hence if an agent signs such an instrument in his own name, he alone is liable upon it. So also only the payee can sue; but this part of the rule is not important, since the payee by indorsing the instrument could confer upon the undisclosed principal or any other person the right to sue.

Example 6. A buys goods for P without disclosing P, and gives a promissory note to X's order, signed “A, agent." X cannot sue P upon this. The word "agent" has no more effect than if A had signed “A, shoemaker," or "A, Republican." These are mere words of description. A alone is liable. Had this been a nonnegotiable instrument P could have been sued upon it.

(d) If, after discovering the principal, the third party unequivocally elects to hold the agent, he cannot afterwards proceed against the principal. The third person has an option to hold the agent to the contract made in the agent's name, or to disregard the agent and proceed against the principal. But he cannot do both. He must elect, and his election once made is binding upon him.

130. Frauds by agent. If in the course of an authorized negotiation for the principal an agent makes unauthorized false representations, amounting to fraud or deceit, concerning the subject-matter of a contract, the principal is liable in the same way as if he had made them personally (see sec. 29 ante).

If the agent commits a fraud for his own benefit and not for his principal's, but by means of instrumentalities intrusted to him by his principal, the latter may be liable.

Examples: 1. A stock transfer agent of a corporation fraudulently issues stock certificates and sells them for his own benefit. The corporation is held liable in New York and many other American states.

2. An agent, authorized by a railway company to receive goods and issue bills of lading, fraudulently issues bills of lading for wheat where no wheat is received, and sells the bills of lading to innocent buyers. In New York and many other states the railway is liable, but England and some of our states hold otherwise.

3. A is both telegraph operator and express agent at M. He telegraphs X in the name of X's agent, requesting the transmission of money by express. X sends the money by express. The agent takes it and absconds. The telegraph company is liable to X.

IV. LIABILITY OF AGENT TO THIRD PARTIES

131. Where agent alone is liable. If an agent exceeds his authority so that his principal is not bound, the agent is liable to the third party for the breach of his warranty of authority. He is not liable on the contract itself when that was made in the principal's name. The agent is liable for any fraud, deceit, or other tort committed by him while about the principal's business.

If an agent contracts for a fictitious principal, he is liable upon the contract himself.

If an agent signs a sealed instrument or a negotiable instrument in his own name, or in his name with merely descriptive matter after it, he alone is liable unless the body of the instrument shows by its recitals that it is the principal's promise.

Example. "We, as trustees of the X Church, promise to pay to the order of G. H. one hundred dollars. A. B., C. D., E. F., Trustees of the

X Church." This binds the X Church. But if it had read, “We promise to pay, etc.," and been signed in the same way, the church would not have been liable (see sec. 129, par. 2 (b), ante).

132. Where both principal and agent are bound. In a contract made by an agent for an undisclosed principal both are bound, that is, the third party may elect to hold either. Even a written contract (other than a sealed or negotiable one) signed by the agent alone may be shown by parol evidence to be in fact. the contract of an undisclosed principal. This has already been sufficiently considered.

REVIEW QUESTIONS AND PROBLEMS

SECTION 116. What is the meaning of agency? Into what two branches does the subject fall? Explain each. How is the relation created? What is the problem as to third persons? Why is it difficult? Why is or is not the principal or master liable in each example given?

117. May an infant appoint an agent? Is the appointment voidable? Is it void? Same questions as to an insane person? a married woman? If one contracts in behalf of an unincorporated club who is bound? Is a member bound who votes against the making of the contract? May one partner bind another by appointing an agent? May an agent by appointing a subagent bind his principal?

Problem 1. An infant P authorizes an agent A by power of attorney to sell and convey P's real property. A sells and conveys P's property. When P comes of age can he ratify this sale and conveyance, or in order to make it valid must he then execute a new conveyance? What of an infant's authority to an agent to sell a horse? to buy one?

Problem 2. P when sane authorizes A to buy goods for him. P becomes insane, and A afterwards purchases of X, who does not know of P's insanity. Is P bound?

118. Who may be an agent? How must joint agents act? Exception? 119. When must an agent's appointment be in writing? When must it be under seal? Draw a power of attorney to collect debts and give receipts for the same.

120. What is ratification? What are the essentials? If in Example I A had bought the book in his own name could P ratify? Is silence ratification? Can one ratify a forgery of his name to an instrument? How can