Very many persons act as agents for others. Much of the business of
modern times is carried on by persons of this class. All the managers
of corporations are agents of the railways, banks, manufacturing
companies, and the like. They are to be seen everywhere. Every
salesman is an agent. In short, _the larger part of the modern
commerce of the world is done by agents_.
AGENTS ARE OF TWO KINDS, SPECIAL AND GENERAL; and there are important
differences between the two. A GENERAL AGENT is a person who transacts
all the business of the person hiring or appointing him, called a
principal, or all his business of a particular kind. A principal might
have several general agents for the different kinds of business in
which he was engaged. Suppose he has a cotton-factory and a store and
a farm; he might have three general agents, each managing one of these
enterprises.
A general agent may be appointed in different ways. This may be done
by a written contract. Very often, however, no such contract is made,
and the person comes to act in a different way. A cashier of a bank,
for example, is a general agent to transact its business, but the mode
of appointing him rarely consists of anything more than a resolution
of the board of directors. More often than otherwise his appointment
is purely verbal, by word of mouth. And, again, the authority of an
agent thus to act is often found out by his acts, known and approved
by his principal, or in other ways. Suppose that A should manage B's
store for him, buying and selling merchandise with A's knowledge; by
thus putting him before the world as B's agent the law would say that
he really was so, and B would be bound by his acts within a limit soon
to be explained. This, perhaps, is the more common way in which the
world learns of the authority of an agent's act. He does a great
variety of things which it is well known must be within the knowledge
of his principal or employer and, as they are known by the employer
and the employer says nothing in the way of disowning or repudiating
these acts, he is bound by them.
Sometimes, indeed, persons pretend to be agents for others when really
they have no authority to act. When this is done, and the person for
whom they are pretending to act finds out what they are doing, then it
is his immediate duty to take such action as the circumstances require
to disown the acts of such pretenders. If this is not done he may be
bound by them. His action in adopting or approving is called the
RATIFYING of an agent's act; and when this is done the agent's action
is just as valid as though authority had been given to him to act in
the beginning. The principal's conduct in thus ratifying an agent's
acts relates back to the time when the agent first began to act.
A SPECIAL AGENT is appointed to do a particular thing and this is more
often done in writing. Perhaps the most common illustration is the
appointment of some one to act for another at the annual meeting of a
corporation to vote on stock. Such a person is called a PROXY, and
persons often act as through another in this manner. Sometimes one
person serves as a proxy or agent for a very large number of
shareholders.
The liability of a principal for the acts of a general agent are very
different from his liability for the acts of a special agent. In the
former case the principal is said to be responsible for all the acts
of his agent that are within the general scope of his business. In
other words, if it is generally known that A is acting as the general
agent of B in conducting his business,--we will say managing his
cotton-factory,--A will bind his principal B for everything done by
him as general agent in conducting that business.
Suppose A was acting as a general agent of an insurance company and,
among other things, was told by the president or board of directors of
the company not to insure property in a given place below a stated
rate. Suppose a person should go to this agent, desiring to have his
property insured, but at a lower rate, and suppose that the agent
should finally yield and make a lower rate as requested. Could his
company repudiate the contract? Clearly not, for it was A's duty to
make contracts for insuring properties. If the insured knew that the
agent had been expressly limited in the rates for insuring and that he
was going contrary to his instructions in making the lower rate, then,
indeed, the company would not be bound by the contract. Otherwise it
could not repudiate the act, for it would fall within the general
principle that a principal is bound by the acts of his agent done
within the general scope of his business or employment; and such a
contract clearly would be within the limit. For, indeed, this is the
very business of the agent--to effect insurance.
The only thing necessary, therefore, for a person doing business with
a general agent is to find out whether he is such an agent; and when
this is learned then a person can safely transact business with him,
doing anything within the general scope of his powers, unless the
person actually knows that some limit or restriction has been put upon
the agent. It is not his duty to find out what the powers of a general
agent are, but simply whether he is a general agent or not.
But the rule is very different that applies to the liability of a
principal who employs a special agent. In such cases it is the duty of
the person doing business with him to inquire what his powers are, for
the principal will not be bound beyond these. Such an inquiry,
therefore, must be made. He must ask the agent to show the authority
under which he is appointed, or in some way clearly convince the other
what his powers are before any business can be safely done.
The authority of a special agent is often stated in writing, and the
paper is called A POWER OF ATTORNEY. _In selling land an agent should
always have such a power_, because a good title to land can only be
given in writing, and this power of attorney should be copied in the
records kept for this purpose with the deed itself to show by what
authority the agent acted in selling the land. Every now and then when
a person buys a piece of land and examines the title to find out
whether it is perfect or not, he discovers that somewhere in the chain
of title a deed was made by the agent of the seller instead of the
seller himself, and the buyer had forgotten to put the power of
attorney on record with his deed. The omission to do this is often
serious. It is in truth just as important for an agent to have a
proper power of attorney in such a case as to give a proper deed for
his principal, and the one paper should be recorded quite as much as
the other, as both are parts of the same story.
_Sometimes an agent appoints a subagent._ This may be orally or in
writing. A good illustration is that of the collection of a cheque
deposited with a bank. Suppose a cheque is deposited in a bank in
Chicago drawn on a bank in Newark, N. J. The Chicago bank is, in the
first instance, the agent for collecting it. The bank would send the
cheque to another in New York, which would be its subagent, and that
bank in turn would send it to a third bank in Newark, which would be a
subagent of the New York bank. Thus there would be two subagents,
besides the agent, employed in collecting the cheque.
There is an important question relating to the liability of one of
these agents or subagents in the event of the negligent performance of
the duty; which is responsible? Generally, it is said, if the general
agent appoints a subagent he is nevertheless responsible for his act.
Suppose a street contractor employs a subagent to repair a street and
he digs a hole and improperly guards it and some one falls into the
place and is injured, can the person thus injured look to the
contractor or to the subcontractor for compensation for his injury?
The contractor is liable in such cases. It may be added, however, that
although he is liable to the person injured, he may be able to recover
of the subcontractor or subagent. But this rule does not apply to the
banks in every State. In some of them the first bank in which the
cheque was deposited is liable for the negligence of others that may
be afterward employed in collecting it, and this rule prevails in the
federal courts. In a larger number of States the first bank fully
performs its duty in selecting a proper or reputable agent, and in
sending the cheque to it for collection. Should the second or subagent
be neglectful, the depositor of the cheque could compel that agent,
and not the first, to make its loss good.