CHAPTER VIII

AGENCY. MASTER AND SERVANT

Agents and Servants. In England there formerly was a clear distinction made or attempted between agents and servants; a distinction of some importance where many of the latter were menials. In the United States at the present time there is a tendency to minimize any such distinction and to use the word "employee."

There is a wide gulf between certain agents and some kinds of servants. A real estate agent often has had no contact with his principal except to accept the agency and arrange the price; he conducts his agency by his own methods, independently of his principal who very frequently has weaker financial ability than the agent. A farm hand, on the other hand, does the work required in the form and in other respects as ordered by his master, and in general is without financial responsibility. While the distinction is here clear enough, in many cases it is difficult to distinguish between the two classes of employees. Judges and authors of law treatises have alike been unsuccessful in framing satisfactory definitions. Distinctions between Agents and Servants. Certain distinctions between agents and servants, however, may be stated. The servant does for his master as a matter of service the things that he is hired to do; the agent represents his principal in business transactions of the sort for which he is employed. The servant receives orders as to the performance of his work; the agent is intrusted with the business of his principal. The servant seldom has power to contract for his master's benefit; the agent's duties are largely contractual.

The agent deals with third parties in connection with the property of the principal, in buying, selling, leasing, collecting, or some similar way. The servant does what is required of him in the way of service either to his master, or to third parties for the benefit of his master. The power of control by the master over the servant is an important, perhaps the essential, feature; this may sometimes serve to determine which of two or more persons is the master where the servant's act has created liability for someone. It is further true that a man may be an agent with reference to certain of his duties and a servant in certain other duties; he may be at the same time both servant and agent.

The distinction has practical importance, as a master is responsible for the acts of a servant, sometimes in cases where the same act or a similar act by an agent will not make his principal liable.

Liability More Important than Definition. In many cases the nature of the act and the circumstances surrounding it will serve to establish the liability, or lack of it, of the principal or master on the one hand, or of the agent or servant on the other, without involving subtle distinctions of definition. At the trial it will be determined, if necessary, whether some act involved liability on the part of the principal or master. The jury will pass on the facts, or where these are undisputed, the judge will determine their legal effect. If the action of the jury seems legally unsound in view of the facts presented and the judge's instructions the judge may set aside the verdict as "contrary to the law and facts in the case.'

Effect of Statute Law. Recent legislation has provided Statute Law which has done away with some of the earlier fine distinctions, and has made use of the words "employee" or "workman." The greater part of such legislation affects only the relations between employer and employee, and does not touch their relations with third parties. There is some advantage in discussing the law of agency and the law of master and servant separately, in certain respects at least.

AGENCY

Creation of Agency. The functions of an agent are properly contractual. An agency is created ordinarily either by appointment or by ratification. It may be express or implied; if express, it may be either written or oral. If by appointment in the case of personal property, the authority to buy, or sell, or fix prices, may be either written or oral, or perhaps in whole or part by conduct; the request of a principal, written or oral, followed by the entrance upon his duties by the agent, constitutes appointment.

The appointment must be written in certain cases where the principal's act must be in writing, but not in all such cases. In some States it is necessary in case of a lease. In the case of a deed conveying real property, or other instrument which must be executed under seal, the authority of the agent must be under seal also.

Authorization by Contract. The agency is brought about by contract; the authorization, when accepted, is a contract. The agency may be implied as in other cases of contract; if services are rendered, the law implies from their acceptance, not only the assumption of responsibility for the acts, but also a promise to pay for their performance.

Ratification. It often happens that someone performs an act in

behalf of another, for his benefit, substantially as an agent, but without prior authorization, or in excess of authority; if the beneficiary assents to and adopts the action, then by such "ratification," as it is called, a relation of principal and agent is established.

Express or Implied Ratification. This ratification may be express or implied; it may be written, oral, or by conduct; silence is one phase of conduct. The acceptance of benefits from the act constitutes such conduct; acquiescence has sometimes the same effect, this more clearly in a case where the act was one in excess of the authority of an agent.

Principal must be Certain. An act to be subject to ratification must, as a rule, have been openly done by one posing as an agent, in behalf of the person who becomes the principal by ratifying it. While the latter need not be specified, he apparently must be indicated sufficiently to make his identity certain. Assent or adoption by any other person does not create an agency by ratification.

Assent to Legal Acts with Knowledge. To constitute a ratification sufficient to bind the principal, the assent of the principal must be with knowledge of all material facts, or in disregard of them. A principal may ratify any act which he might himself perform, but not illegal acts, nor acts from which he would be estopped. If an act by him must be in writing or other necessary form, his ratification must also be in such form. A ratification once made is irrevocable and binds the principal to responsibility for the acts of his agent, whether in contract or in tort.

Ratification Binds Parties. When ratification has taken place, the third party and principal then become equally bound as the parties to the contract made by the agent. Whether the third party has the right to withdraw pending ratification seems to be not fully settled. The principal can not by ratification give precedence to the acts of his agent over acts of his own in which strangers had acquired rights; for instance, if an agent sells goods and the principal meantime has sold the same goods to a stranger, the principal can not by ratification avoid his own sale to the stranger.

Estoppel. Somewhat along the same line, if a person has encouraged or allowed a third party to believe an agency exists, he is estopped from denying such an agency and is virtually held as principal. The conduct of the principal is measured upon substantially the lines which constitute fraud or deceit as indicated in the chapter on torts.

Agency by Necessity. There is further an agency by "necessity." A wife or minor may thus act for the husband or father in purchasing necessaries; a shipmaster in buying supplies. In the case of delay by act of God, a railroad company may and should sell perishable freight.

Minor as Agent. It is an interesting fact that a minor (under 21 years) may lawfully contract as agent for another although he could not do so

for himself. The law throws its protecting arm around the minor's interests; the principal who employs the minor is competent to take care of himself. The minor is not competent, however, to make the contract of agency between the principal and himself; at least such a contract is voidable by the minor.

Kinds of Agents. In business, there are agents to sell, purchase, collect, execute commercial paper, manage business; to act as bank cashiers, shipmasters, factors, brokers, auctioneers, attorneys at law, and in various other capacities.

Special or General. An agent may be special or general. A special agent is limited in his authority to specific acts. A general agent ordinarily has not unlimited authority or powers, but has full authority or power to do all acts incidental, necessary, or usual to agency in the line of business in which he is engaged. A good example of special agency is that created by a power of attorney authorizing another to do specific acts in the stead of the principal. An example of a general agent is the manager of a commercial or manufacturing establishment. It is evident that a corporation can act only through its officers or agents in general business operations.

Express Authorization. In the case of express authorization of a special agent, the writing should show the extent and character of the agency. In the case of express authorization of a general agent, however, the terms can seldom be complete and explicit. In general, in such cases, any writing will be construed liberally to effect the object, and favorably to an agent as regards any acts done in good faith, and favorably also to a third party. As an aid to determining how far the agency extends, the custom as to agents and general usage in the same or similar lines of business may be invoked, and any ratification by the principal of acts of the agent would have considerable bearing. The principle of ratification is clearly important in connection with agency.

That the line of cleavage as to appointment or ratification will not always be clear, must be evident, and it is the legitimate function of a suit at law to settle any resulting difference of opinion. The burden of proof as to the existence of the agency is on the person dealing with the agent.

Joint Agents. Sometimes two persons are joint agents. The general rule is that in such cases the action of both is essential. Where, however, the intent is apparently otherwise, or where custom serves to determine the status, either one may act. This is also true when partnerships are agents.

Principal Bound by Acts of Agent. Where the relation of agency exists, the principal is bound by the acts of the agent exercised within his authority. He is bound not merely by the agent's contracts, but also by torts com