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   Chapter 58 CONCERNING AGENTS

Up To Date Business By Various Characters: 8627

Updated: 2017-12-06 00:03


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.

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