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by Law, said, "Please remit amount direct to me." The bill had on its face in red ink, "All remittances on account, or in settlement of bills, must be made direct to the principal." About a month later Stokes paid Sheridan the amount of the bill. Sheridan absconded with the money; Law brought suit and obtained judgment.1

In this case the salesman had no authority to collect. The case was clear for the plaintiff, Law, because he had given notice on his billhead and in his letter of his limitation on the salesman's authority. Usually there would be more trouble in a case of this kind because the proof would not be so clear. The agent himself would be liable to suit by the third party; but in such a case the probability would be that the agent was judgment-proof or had left for fresh fields and pastures new.

In each case the third party should know for his own safety just what power the agent has to bind his principal, and that the principal is responsible. He cannot always rely on the representations of the agent himself as to the extent of his authority. It is the third party's duty to make due inquiry into the matter, as in case of a dispute later the burden of proof is on the third party to show that the agent had authority for the particular act.

Notes:

I.

1. It is unsafe for a third party to deal with an agent without sufficient information as to his authority. 2. Care should be taken never to make payments to an unauthorized agent.

3. Where salesmen are not expected to collect payment, customers should be informed of the fact.

4. In dealing with an agent, it is necessary to know whom he represents and how far his authority extends.

1 Law v. Stokes, 32 N. J. L. 249.

§ 148. Third Party's Relation to the Principal

The third party is really dealing with the principal, and the agent is merely the means of communication. When the contract is signed, the name of the agent is attached as agent, and the principal, not the agent, is bound. Therefore the relation between the third party and the principal is the same as between any other parties to a contract.

The third party is brought into the contract relation as a principal, and after that in most cases the agent is disregarded. The principal and the third party contract with each other, and, if the contract has not been executed, each has the right to compel the performance or to recover damages for any breach or failure in performance. In any dispute in regard to the contract, the resulting suit will be between the parties, and the agent will not figure save as a witness able to give material evidence. If there has been fraud or false representation on either side, the fact that the transaction has been negotiated through an agent does not affect the liabilities or the remedies. Note:

I.

When dealing through an agent, the third party should bear in mind that it is the principal with whom he contracts.

REVIEW QUESTIONS

1. How can a person dealing with an agent ascertain his authority? Why is it hard to tell what the agent has a right to do

2. With whom does the third party really contract? If any suit arose, who would be the parties?

3. When does an agent make himself responsible to the third party?

CHAPTER XXVI

TERMINATION OF AGENCY

§ 149. Termination by Fulfilment

The agent's authority is terminated when he completes the purposes of his agency, or at the expiration of the period for which he was engaged. It is obvious that if an agent has been employed to purchase a farm and the farm has been purchased, the agent's authority is ended; or if a salesman has been engaged for a year to sell goods, it is plain that the agency, unless renewed, terminates at the end of the year. Generally, the rule is that the agency ends at the termination of the period for which the agent has been engaged, or the completion of the undertaking for which he has been retained.

The principal should in some way inform those who have been dealing with the agent that the agent no longer has authority to act. If the principal fails to do this, and the agent continues to act, the principal is bound.

Note:

I.

An agency terminates naturally (a) when the term ends, or (b) when the undertaking is completed.

§ 150. Termination by Either Party

The contract of agency may be terminated at any time by either the principal or the agent. It is obvious that the contract between principal and agent (like any other contract) may terminate at any time by agreement of the parties. It is also true that the contract (since it is one of mutual trust and confidence) may be terminated at will by either one of the parties against the consent of the other party, except in the

case of an agent having an interest in the subject matter; in which event the principal cannot terminate the relation without the agent's consent. (See § 152.)

If the principal and the agent contracted for a certain period of time or for a certain undertaking, and the principal revoked the agent's authority without good cause, the former would be liable to suit for damages by the agent for breach of

contract.

Where there is employment for a definite period of time, express or implied, and the agent is discharged without cause before the expiration of the period, the principal will be liable to the agent as in the breach of any other contract; in such cases the agent may elect to treat the contract as rescinded and bring an action to recover the value of his services and money expended.1

The agent can renounce his employment at any time. The courts will not force a man to work for another against his will. If, however, the agent has agreed to act for a certain time, or to do some particular thing, he may be liable to pay damages if he breaks off before the expiration of the period. Also, if he tries to act for someone else in the same line of business before the expiration of the term, it is probable that the principal could obtain an injunction to prevent his working for a competitor. In a contract of agency, there is often inserted a clause providing that the agent shall not leave the employ of the principal and represent anyone else in the same line of business for a specified period of time after his contract terminates. (See § 138.)

If the subject matter of an agency is destroyed, the contract is thereby terminated. A case of this kind would occur when a building which is to be leased by an agent is burned before the lease is effected.

1 Glover v. Henderson, 120 Mo. 367.

Notice of Revocation. So far as the agent is concerned, the act of revocation becomes operative only from the time he has actual notice thereof; notice to third parties without notice to the agent will not effect a revocation as to the agent. Conversely, a notice only to the agent is not effective as to third parties. The acts of the agent in dealing with third parties without notice are binding on the principal. Whatever is sufficient to put an agent or third party on inquiry will serve as a legal notice of revocation.

Notes:

1. Either party may terminate a contract of agency at any time.

2.

Either party breaking a contract of agency for a specified period or undertaking without just cause is liable in damages.

3. An agent who breaks his contract may be prevented during the term of the contract from taking employment with a business competitor.

§ 151. Termination by Disability

An agent's authority is revoked by the death, insanity, or bankruptcy of his principal; in like manner the relation is destroyed by the death or disability of the agent. This is a principle of universal application. When a man dies, all contracts of agency cease at once; all powers of attorney, and every authority to anyone else to act for him are terminated. If in ignorance of his principal's death an agent did business for him, the business would be void and of no effect.

A case which often happens is that of a person of advanced years who gives personal property to an agent to deliver to someone else and then dies before the property has been turned over. In such cases the courts hold that the agency is revoked by the death of the principal, and the gift cannot take effect.

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