and a doctrine of de facto corporations for the benefit of third persons has also found its place in the law.

The question therefore reduces itself at last to a question. of judgment. Are there considerations of public policy so urgent as to make it proper for the courts to allow persons to assert the right to be a corporation even when, on a sound construction of the legislative enactments, they have no such right? Considerations tending to an affirmative answer are that the courts should save time by refusing to go into the details of incorporation; and that they should encourage the use of the corporate device by establishing a consolation doctrine to the effect that, if persons try to form a corporation and pretty nearly succeed, they shall have pretty nearly as many rights as though they had succeeded. Considerations tending to a negative answer are that the courts should not, directly or indirectly, take to themselves powers belonging to the legislature, and that it is anomalous to bridge a legal gap even in favor of a person who has made an expenditure in good faith."

§359. From Edward H. Warren. Collateral Attack on Corporation. 21 Harv. L. Rev. 305.-"Viewing the subject as a whole, it is seen that whether or not collateral attack is to be permitted depends not so much on logical deductions as on the exercise of a sound judgment. Opposing considerations must be weighed. The law, therefore, cannot be pictured in bright lines. Some large features, however, emerge. (1) Collateral attack should be permitted to a stranger to whose prejudice the associates seek to assert a right dependent upon incorporation, -and this whether there are the technical requisites of the de facto doctrine, or not. (2) The associates should not be shielded from full liability where their legal incorporation failed for some reason more serious than an informality or irregularity in their organization. (3) These effective checks by collateral attack being established, the courts may, in many other instances, properly deny such attack-and this whether there are the technical requisites of the de facto doctrine, or not. Thus, notably, where A seeks to avoid liability on the ground that there was no law under which the associates could have obtained authority for their corporate action.

CHAPTER XII

OPERATION OF RELATIONS AS TO OUTSIDERS

$360

A. IN AGENCY

CAWTHORN v. LUSK.

Supreme Court of Alabama, 1892. [97 Ala. 674.]

HEAD, J.: The action is brought by appellants to recover damages for the breach of an agreement for the sale of 800 sacks of dried grapes, made by Stollenwerck & Co., as agents of defendants. The case was tried by the city court without a jury, and judgment rendered for defendants. The sale of the grapes by Stollenwerck & Co. at 32 cents per pound f. o. b. to be delivered in September and October following, and that the intention and understanding of these parties was that the sale was a finality; also that defendants refused to deliver the grapes are uncontroverted facts. The only disputed question of fact relates to the authority of Stollenwerck & Co. to bind defendants by the contract of sale, without first submitting it for their acceptance or rejection.

Defendants, who reside and are doing business in California, while conceding that Stollenwerck & Co. are their agents or brokers in Birmingham, Ala., to sell dried fruits, claim that they were only authorized to make contracts of sale subject to confirmation. That such is the nature and extent of their general authority is shown by the letter of instructions, dated July 9, 1890, sent by defendants to them, and by the general custom of the trade, of which plaintiffs, having been engaged in the same business in Birmingham for several years, are chargeable with notice.

The question then arises whether authority, express or implied, was subsequently conferred to sell the grapes at 31⁄2 cents per pound. Plaintiffs claim that such authority is implied from a telegram sent by defendants to Stollenwerck & Co., when interpreted by the custom and usage of the trade. The law presumes that when a commercial agency is to be exer

cised, in the absence of limitation or prohibition, it is to be conducted in the mode authorized and justified by the customs and usages of such trade or business. In Guesnard v. Railroad Co., 76 Ala. 453, this doctrine is asserted as follows: "Where a mercantile agency is to be executed at a particular place, the principal who employs the agent is presumed to consent that he may execute it, in the absence of particular instructions, according to the general custom and usage relating to that kind of trade or business, whatever it may be. The law implies that he gives his consent for his agent to act as all other similar agents who are honest and diligent are accustomed to do; and it is immaterial, as a general rule, whether the principal is informed as to such customs and usages or not." It is true that, when an agency is created by a written instrument, the nature and extent of the authority must be ascertained from the instrument itself, and cannot be enlarged by parol proof. This rule is not violated by the admission of proof of the usages of trade. They are admitted, not for the purpose of enlarging, but of interpreting the powers actually given. Says Judge Story: "The known usages of trade and business often become the true exponents of the nature and extent of an implied authority." Story, Ag. §96; Wheeler v. McGuire, 86 Ala. 398, 5 South. 190, 2 L. R. A. 808,

The telegram referred to was sent by defendants to Stollenwerck & Co. July 18, 1890, and is as follows: "Cannot offer dried grapes below 32 f. o. b. Have advanced to 334." This telegram was in response to one sent by Stollenwerck & Co. to defendants the day before, of which the following is a copy: "Ormsby offering dried grapes 4.70. Can't you let us meet that price?" The evidence shows a custom or usage of the trade to the effect that a telegram sent by the principal to the broker giving a price, without any stipulation in the telegram that sales made at such price shall be subject to confirmation by the principal, is authority to the broker to sell finally and unconditionally at that price, no matter what the prior instructions were. This custom is testified to by two witnesses, whose testimony is uncontradicted. True, Isadore Jacobs, who represents defendants, testifies: "None of our letters or telegrams to Stollenwerck & Co. instructed them to sell dried grapes, our instructions being to take orders for dried grapes subject to confirmation; and, even if letters or telegrams had been sent instructing brokers to sell, it would be understood that they could only sell subject to confirmation, unless specially stated, 'You may sell without confirmation.""

It will be observed that the witness does not deny the exist-. ence of the custom, but only testifies to the private understanding between defendants and their brokers. Such private understanding is not binding on plaintiffs, unless communicated to them. There is no pretense that it was communicated; on the contrary, the evidence shows that the telegram of July 18, 1890, was shown to plaintiffs as Stollenwerck & Co.'s authority to make a final and unconditional sale. We find from the evidence that there was such custom. Considering the telegram in connection with the one to which it was a response, it might well be contended, without reference to the custom, that it was at least implied authority to sell dried grapes at 31⁄2 cents per pound f. o. b. But it is not necessary to so find. There being no instruction or stipulation in the telegram that sales at that price are subject to confirmation, Stollenwerck & Co. were thereby authorized under the custom to sell finally and unconditionally the grapes to plaintiffs, and defendants are bound by the contract of sale to the same extent as if they had sold the grapes. Herring v. Skaggs, 62 Ala. 180, 34 Am. Rep. 4.

The measure of damages is the difference between the price which plaintiffs agreed to pay for the grapes, including cost of transportation to Birmingham, and the market price at Birmingham at the time of delivery, with interest. Under the evidence, we assess the plaintiffs' damages at the sum of $945. The judgment of the city court is reversed, and a judgment will be entered in this court in favor of the plaintiffs for said sum of $945, together with the costs in this court and the city court.

This opinion, except as to assessment of damages, was prepared by the late Justice CLOPTON. Reversed and rendered.

§361. Trade Usage and the "Apparent Scope" of Authority.-Granting the principle of law, that secret instructions cannot affect the authority of an agent, there still remains the question: What is the apparent scope of the authority of a traveling salesman? This, of course, is a business question. In many trades, the so-called "drummer" is known to have no power to make a binding contract. His function is simply to solicit orders which are offers subject to be accepted or rejected by his employers. The importance of trade usage in fixing the scope of such agencies is illustrated in the foregoing case.

Supreme Court of Alabama, 1878. [62 Ala. 180.]

[Action for damages for breach of a warranty by a sales agent that a safe was burglar proof. The safe had been broken open and rifled of a sum of money and other valuables.]

STONE, J.: In Skinner v. Gunn, 9 Port. 305, speaking of the power of an agent to bind his principal, this court said: "The power in this case is to sell and convey the negro in the name of the plaintiff, and the agent must, as an incident of that power, and in the absence of any prohibition, have the right to warrant the soundness of the slave, as that is a usual and ordinary stipulation in such contracts, and must therefore be implied to effectuate the object of the power.' The court, in the same case, had said, "An authority to do an act must include power to do everything usual and necessary to its accomplishment." This doctrine was reaffirmed in Gaines v. McKinley, 1 Ala. 446, and in Cocke v. Campbell, 13 Ala. 286. It will be observed that, in these cases, the court states, as matter of law, that power given to sell a slave carried with it power to warrant his soundness in the absence of prohibition. A similar principle is found in the books, in reference to the power of an agent to bind his principle, by warranty of the soundness of a horse he is authorized to sell. It is a "usual and ordinary stipulation in such contracts," say the courts. Perhaps the custom of such warranties is so general, and has prevailed so long, that it has come to be treated as judicial knowledge. Certainly it was not intended to be affirmed, that an agent with general powers of sale, has unlimited power to bind his principal by any and every stipulation the various phases of traffic may be made to assume. If so, the words, "in the absence of prohibition," found in the case of Skinner v. Gunn, supra, are meaningless and powerless.

In the case of Fisher v. Campbell, 9 Port. 210, a question arose on the implied power of an agent to bind his principal. That was the case of a non-resident planter, whose overseer in charge made purchases of supplies for the plantation and hands. It was proved that the employer had given the overseer instructions to purchase pork for his slaves from a particular mercantile house at Montgomery, with whom he had made arrangements for that purpose, and had given him no directions to buy anywhere else, nor had he any authority to purchase from any other person. The plantation was in Lowndes county, and, the roads being bad, the overseer purchased pork in his own county, much nearer to him, and at