Liability The rights of the parties may be thus stated. If the agent commits a fraud in the course of his ex delicto; employment, he is liable, and so is his principal. ex contractu. National Co. of Glas gow v. If he commits a fraud outside the scope of his authority he would be liable, but not his principal. In the first case the other party might sue upon the contract, and in either case he would be entitled to avoid the contract upon the conditions described on page 176. Where a principal allows his agent to make a statement which he knows, but which the agent does not know, to be false, it would seem difficult to sue either principal or agent for deceit; for the one did not make the statement, and the other honestly believed it to be true. But the contract could be set aside or resisted on the ground of material misrepresentation if not on the ground of fraud: and it would be strange if the consequences of fraud did not attach to a principal who knowingly employed an ignorant agent in order to profit by his misrepresentations. Liability In the case of a contract uberrimae fidei, the principal for nondisclosure. *would seem to be liable to have his contract invalidated if his agent conceals a material fact. It is said that 'the knowledge of the agent is the knowledge of the principal,' and this doctrine has been carried so far that, Blackburn v. in the Court of Appeal, a principal was held to be unable to recover on a policy of insurance because an agent whom he had employed, but who had not effected the insurance, knew of facts, materially affecting the risk, which he did not communicate to his employer, and of which the 12 App. Ca. employer was unaware. The House of Lords overruled this decision. Vigors, 17 Q. B. D. (C. A.) 553. 531. [*354] The agent is employed to represent the principal for one or more transactions with more or less discretionary power. What he does in the course of the transaction is the act of his principal; what he knows and does not tell is - if he ought to tell it and if the transaction is carried out—a non-disclosure which would affect his principal's rights. But he represents his principal for the purpose of the transaction in question, and if, before it is effected, his authority is revoked, the relation of employer and employed ceases to exist. When knowl edge of knowl In fact the knowledge of the agent is the knowledge of the principal when, and only when, it is imparted to the principal, or the transaction to which the knowledge is agent is material is carried out.1 Hence it follows that if the agent knows that the principal is being defrauded, the principal. principal cannot set aside the contract on the ground of fraud. An agent of an insurance company obtained a proposal for insurance from a one-eyed man who, being also illiterate, signed at the request of the agent a form stating among other things that he was free from any physical infirmity. The agent knew that the insured had but one eye. The insurance was against partial or total disablement; after a while, the insured lost his second eye, and claimed the amount due under the policy for a total disablement. The company resisted the claim, on the ground of the falsehood contained in the proposal; but it was held that the knowledge of the agent was their knowledge and that they were liable. 1 See Constant v. University of Rochester, 111 N. Y. 604; Trentor v. Pothen, 46 Minn. 298. edge of Bawden v. London & ance Co., (1) Agreement. Revoca tion a condition subsequent. Limits of right to revoke. Rights of third parties. 5 Q. B. D. 394. 6 App. Ca. 24. Illustra tion from case of CHAPTER III. Determination of Agent's Authority. AN agent's authority may be determined in any one of three ways: by agreement; by change of status; or by death. (i) Agreement. The relation of principal and agent is founded on mutual consent, and may be brought to a close by the same process which originated it, the agreement of the parties. Where this agreement is expressed by both parties, or where, at the time the authority was given, its duration was fixed, the matter is obvious and needs no discussion. Where authority is determined by revocation it must be borne in mind that the right of either party to bring the relation to an end by notice given to the other is a term in the original contract of employment. But the principal's right to revoke is affected by the interests (1) of third parties, (2) of the agent. (1) A principal may not privately limit or revoke an authority which he has allowed his agent publicly to He will be bound by the acts of the agent which he has given other persons reason to suppose are done by his authority. assume. The case of Debenham v. Mellon is a good illustration of the nature and limits of this right of revocation. A husband who supplied his wife with such things as might be considered necessaries for her forbade her to [*356] pledge *his credit; any authority she might ever husband have enjoyed for that purpose was thereby deter- and wife. mined. She dealt with a tradesman who had not before supplied her with goods on her husband's credit and had no notice of his refusal to authorize her dealings. He supplied these goods on the husband's credit and sued him for their price. It was held that the husband was not liable, and the following rules were laid down in the judgments given. ity. (a) Marriage does not of itself create by implication an Marriage authority from the husband to the wife to pledge the no authorhusband's credit; except in such cases of necessity as we have described above. The wife therefore can only be constituted her husband's agent by express authority or by such conduct on his part as would estop him from denying the agency. (b) Where the husband has habitually ratified the acts of his wife in pledging his credit, he cannot, as regards those whom he has thus induced to look to him for payment, revoke her authority without notice. supra, p. 334. But may raise a pre sumption from con duct. 403. 'If a tradesman has had dealings with the wife upon the credit 5 Q. B. D. of the husband, and the husband has paid him without demur in respect of such dealings, the tradesman has a right to assume, in the absence of notice to the contrary, that the authority of the wife which the husband has recognized continues. The husband's quiescence is in such cases tantamount to acquiescence, and forbids his denying an authority which his own conduct has invited the tradesman to assume.' wife's (c) In the absence of such authority arising from con- Otherwise duct the husband is entitled as against persons dealing authority with his wife to revoke any express or implied authority revocable which he may have given her, and to do so without notice to persons so dealing. The tradesman must be taken to know the law; he knows that the wife has no authority in fact or in law to pledge the husband's credit even for necessaries, unless he expressly or impliedly gives it her, and that what the husband gives he may take away.' without notice. Per The siger, L.J., 5Q. B. D 403. Rights of agent. What is an interest? [*357] The case of husband and wife is perhaps the best, as it *is the strongest, illustration of the limits within. which the principal may revoke an authority consistently with the rights of third parties.1 (2) If the employment is in its nature such that the authority cannot be revoked without loss to the agent, the principal may not revoke. This rule has recently been treated as identical with a rule of a more limited significance, that an authority coupled with an interest is irrevocable.' Authorities given to an agent to pay to a third party a debt which he owes to his principal, or to sell lands and pay himself a debt due to him out of the proceeds, are instances in which an authority has been held to be irrevocable by reason of interest. The result appears to be,' said 5 C. B. 917. Wilde, C.J., in Smart v. Sandars, that where an agreement is entered into on sufficient consideration, whereby an authority is given for the purpose of conferring some benefit on the donee of that authority, such an authority is irrevocable. That is what is usually meant by an authority coupled with an interest.'2 ibid. 895. It may be well to compare the rule in Smart v. Sandars with the wider rule which I have laid down above. In Smart v. Sandars a factor who had made advances on account of his principal sold goods of the latter, contrary to his orders, in order to repay himself. He alleged that he was given in the first instance authority to sell; that he had an interest in the proceeds, arising from the advances; and so, an irrevocable authority. It was held that he had no such authority. 1 Notice of revocation is necessary to protect third parties. Claflin v. Lenheim, 66 N. Y. 301. But if the agency be for a single act, notice is unnecessary after the performance of that act. Watts v. Kavanagh, 35 Vt. 34. 2 Hunt v. Rousmanier, 8 Wheat. (U. S.) 174. |