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George L. (George Louis) Reinhard.

A treatise on the law of agency in contract and tort; including special chapters on attorneys at law, auctioneers, bank officers, brokers, factors, insurance agents, traveling salesman, public agents and officers, master and servant online

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Online LibraryGeorge L. (George Louis) ReinhardA treatise on the law of agency in contract and tort; including special chapters on attorneys at law, auctioneers, bank officers, brokers, factors, insurance agents, traveling salesman, public agents and officers, master and servant → online text (page 14 of 82)
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in the absence of other evidence that she has employed him as such."^
The agency may be inferred, however, from proof of such relation
together with other circumstances, — such as permitting him to manage
her estate generally ; or that he acted as her agent in similar matters,
previously, without objection on her part, etc.^* Of course, the agency
must be established as in other cases, and the rights and liabilities
growing out of it are not materially different from those arising in
other instances of agency. It is also held by some courts that a
married woman can not, at common law, appoint an agent unless
she is possessed of an estate of her own.^^ But the same court holds
that she may have a servant or servants, and that she and her husband
are jointly liable for the negligent acts of such servant or servants.^*^

§ 38. Persons of unsound mind as principals. — The question
whether a person of unsound mind is capable of appointing an agent
and of binding himself by his acts in matters of business depends,
as it does in other cases of agency, upon the c{uestion as to whether
or not the principal, or party assuming to act as such, has the legal
capacity of contracting. If a person non compos mentis enters into
a contract with a person of sound mind, is such contract void or void-
able for that reason? This, like all other questions arising in the

" Dawson v. Shirley, 6 Blackf. "a Anderson v. Gregg, 44 Miss. 170,

(Ind.) 531. See also, Holladay v. 179.

Daily, 19 Wall. (U. S.) 606; Mott v. " Barnett v. Gluting, 3 Ind. App.

Smith, 16 Cal. 533; Sumner v. Co- 419; Shafer v. Archibald, 116 Ind.

nant, 10 Vt. 2; Lewis v. Coxe, 5 29; Hunt v. Poole, 139 Mass. 224.

Harr. (Del.) 401. ^= Wilcox v. Todd, 64 Mo. 388, 390.

"Flesh V. Lindsay, 115 Mo. 1, 18.



§ 38 PRINCIPAL AND AGENT, 26

law of agency, depends upon the law of the state or country in which
the contract is made. If such person is incapable of binding him-
self, under the law of the land, to make any contract whatever, he
would be necessarily disqualified to make a contract of employing
an agent ; as he would not be permitted to do by another what he is
incapable of doing himself. Story lays down the rule that "idiots,
lunatics and other persons not sui juris are wholly incapable.""
This proposition Mr. Evans^^ seems to regard as not wholly tenable,
when he says: "Mr. Justice Story lays it down broadly that idiots,
lunatics and other person not sui juris are wholly incapable of ap-
pointing an agent. This can not be accepted without qualification
as the law of this country [England], for it has been distinctly laid
down by the court of exchequer chamber, after a review of the cases,
that when one of the parties to a contract is of unsound mind, and
the fact is unknown to the other contracting party, no advantage
having been taken of the lunatic, this unsoundness of mind will not
vacate a contract, especially where the contract is not merely ex-
ecutory, but executed in whole or in part, and the parties can not be
restored altogether to their original position.^^ It is conceived that
the same result would take place if the contract were made through an-
other, who acted upon the authority of the lunatic, without having
been aware or taken advantage of his state of mind. The principle
of the above decision was acted upon in a more recent case."^" The
exception mentioned by Evans is well recognized by the weight of
authority in this country. It is now generally held that if the dis-
ability was not known or apparent to the other contracting party,
and the contract was free from fraud, and the lunatic has received
the benefit thereof, it can not be avoided by him unless both parties
can be restored to their original position.^^ And a contract made

" Story Ag., § 6. to the same effect. Beckroege v.

i« Evans Pr. & Ag. (Bedford's ed.) Schmidt. 5 Week. Law Bui. (Ohio)

44. 788, 6 Ohio Dec. R. 994; Matthiessen

" Citing Molton v. Camroux, 4 & Weichers Refining Co. v. Mc-

Exch. 17. Mahon, 38 N. J. L. 536; Beals v. See.

=" Citing Beavan v. M'Donnell. 9 10 Pa. 56, 49 Am. Dec. 573; McCor-

Exch. 309. See, to the same effect, mick v. Littler. 85 111. 62, 28 Am.

Pollock Conts. 76-84. Rep. 610; Copenrath v. Kienby. S3

=^Flach v. Gottschalk Co., 88 Ind. 18; Physio-Medical College v.

Md. 368, 71 Am. St. 418. See the Wilkinson. 108 Ind. 314; Young v.

elaborate note at p. 425, for a full Stevens, 48 N. H. 133, 97 Am. Dec.

citation and discussion of the au- 592.
thorities on this subject. See also.



27 COMPETENCY OF PARTIES. § 38

by a lunatic during a lucid interval is valid,- But contracts made
with a lunatic after his mental unsoundness has been established by
an inquisition and the appointment of a guardian are absolutely
void.^^ Mr. Mechem seems to approve of the general rule as stated
by Story, but says that it is "subject to the qualifications quite gen-
erally applied to other contracts with persons of this class ; that where
the unsoundness of mind is unknown to the other party, who has acted
in good faith and taken no advantage of it, the contract will not be
set aside, where it has been executed in whole or in part and the
parties can not be altogether restored to their original situation."-^
In an English case decided in 1892 by the queen's bench division,
it was said by Lopes, L. J., that "a defendant who seeks to avoid a
contract on the ground of his insanity must plead and prove, not
merely his insanity, but also the plaintiff's knowledge of that fact,
and unless he proves these two things he can not succeed:"-^ The
doctrine thus broadly stated by Story can not, therefore, be said to be
the prevailing rule in this country, although it must be admitted that
the decisions are by no means harmonious. If the statute of the
state declares the contracts of persons adjudged insane void, they
will, of course, be held not only voidable, but absolutely invalid by the
courts.-'' But an insane person not so declared by the judgment of
the court may in many instances bind himself by his contract, at
least in the absence of a statute making such contract void. The
supreme court of Indiana say: "We think it may be safely stated,
both on principle and authority, that where a person apparently of
sound mind, and not known to be otherwise, and who has not been
found to be otherwise by proper proceedings for that purpose, fairly
and bona fide purchases property and receives and uses the same,
whereby the contract of purchase becomes so far executed that the
parties can not be placed in statu quo, such contract can not be after-
ward set aside, or payment for the goods refused, either by the al-
leged lunatic or his representatives."-" A deed or power of attorney

== Lilly V. Waggoner, 27 111. 395; =" Redden v. Baker. 86 Ind. 191;

Gangwere's Estate, 14 Pa. 417, 53 Carter v. Beckwith, 128 N. Y. 312;

Am. Dec. 553; Tozer v. Saturlee, 3 Gibson v. Soper, 6 Gray (Mass.)

Grant (Pa.) 162. 279; Rogers v. Blackwell, 49 Mich.

=' Hughes v. Jones, 116 N. Y. 67, 192; Hardenbrook v. Sherwood, 72

15 Am. St. 386; Fitzhugh v. Wilcox, Ind. 403.

12 Barb. (N. Y.) 235. =■ Wilder v. Weakley's Estate, 34

-^ Mechem Ag.. § 48. Ind. 181. See also, Fay v. Burditt,

-'^ Imperial Loan Co. v. Stone, L. 81 Ind. 433.
R. (1892) 1 Q. B. 599, 603.



^ 39 PRINCIPAL AXD AGEXT. 28

uiuler ?oal executed by a lunatic or person non compos mentis is held
by some courts absolutely void.-* The court, in the Xew York case
just cited, treats the act of an insane person in making a power of
attorney as analogous to a similar act performed by an infant, saying :
"The doctrine that a lunatic's power of attorney is void finds con-
firmation in the analogy there is between the situation and acts of
infants and lunatics. Both such classes of persons are regarded as
under the protection of the law. But, as already remarked, a lunatic
needs more protection than a minor. The latter is presumed to lack
sufficient discretion. Reason is wanting in degree. With a lunatic
it is wanting altogether. Yet it is universally held, as laid down by
Lord Mansfield in Zouch v. Parsons,-^ that deeds of an infant which
do not take effect by delivery of his hand (in which class he places
a letter of attorney) are void. We are not aware that any different
rule exists in England or in this country. It has repeatedly been
determined that a power of attorney made by an infant is void.
* * * In fact, we know no case of authority in which the letter of
attorney of either an infant or a lunatic has been held merely void-
able." As to the extent of the mental unsoundness, it has been held
in New Jersey that a deaf-mute, sixty-five years old, who is ignorant
and can not read nor write, nor be made to understand an ordinary
business transaction, is incapable of appointing an agent to manage
her property for her.^" And that the contract was negotiated for the
lunatic or person of unsound mind by an agent will not render such
contract binding upon such person, as one who is mentally incapable
of making a contract can not have an agent.^^

§ 39. Same. — All contracts of lunatics and persons of unsound
mind, except for necessaries, are doubtless void if made after
such person has been so declared by a comi^etent court, and a guar-
dian appointed, whether the statute so provides or not.^^* They are
likewise void, or at least voidable, if the incompetency is known to
the other contracting party or he has reasonable grounds to believe
the principal insane.^- And whenever a statute declares a contract

"Dexter v. Hall, 15 Wall. (U. S.) ''a Wadsworth v. Sharpsteen, S N.

9. But it is held to be only voida- Y. 388; Redden v. Baker, 86 Ind. 191.

ble by other courts: Blinn v. =- Crawford v. Scovell. 94 Pa. St.

Schwartz, 71 N. Y. Supp. 343. 48; Alexander v. Raskins, 68 Iowa

-^ 3 Burr. 1804. 73; Matthiessen v. McMahon's Adm.,

^ In re Perrine, 41 N. J. Eq. 409. 38 N. J. L. 536; VanDeusen v. Sweet

=1 Marvin v. Inglis, 39 How. Pr. 51 N. Y. 378; Rogers v. Blackwell,

(N. Y.) 329. 49 Mich. 192; Gibson v. Soper, 6



29 COMPETEXCY OF PARTIES. § 39

by an insane person void, a contract of agency l)y such person would
be void also. Generally they would be inTalid even without such a
statute, after an adjudication by an inquest.^^ If not declared void
by statute, or if the person had not been adjudged insane by a proper
court, when the contract was made, such contract may still be void-
able, if the party who contracted with the insane person can be placed
in statu quo, even though he had no knowledge or notice of the in-
sanity. If the contract was for necessaries, the person will be liable,
and it is difficult to perceive why the cohtract of the lunatic's agent
for that purpose, made in his behalf, would not be equally binding.
There is still another contingency in which the contract may or may
not be binding on the lunatic, and that is in a case in which the
principal was of sound mind when the agency was created but
became non compos mentis afterward. In that case, if the third
person was ignorant of the principal's infirmity, the principal,
having held the agent out to the world as such, will be bound,
whether the agent knew of it or not; and conversely, if the third
person was aware of it, the contract would be voidable whether
the agent knew of the insanity or not.^* The reason for the doctrine
just enunciated is so aptly stated in an English case, by Brett, L. J.,
that it is deemed useful to cjuote a portion of his language: "It is
difficult to assign the ground upon which this doctrine, which, how-
ever, seems to me to be the true principle, exists. It is said that the
right to hold the insane principal liable depends upon contract. I
have a difficulty in assenting to this. It has been said also that the
right depends upon estoppel. I can not see that an estoppel is
created, but it has been said also that the right depends upon repre-
sentations made bj the principal and entitling third persons to act
upon them, until they hear that those representations are withdrawn.
The authorities collected in Story on Agency^^ seem to base the right
upon the ground of public policy; it is there said in effect that the
existence of the right goes in aid of public business. It is, however,
a better way of stating the rule to say that the holding out of another
person as agent is a representation upon which, at the time when it
was made, third parties had a right to act. and if no insanity had

Gray (Maes.) 279; Lynch v. Dodge, "American Trust, etc., Co. v.

130 Mass. 458; Burnham v. Kidwell, Boone, 102 Ga. 202; Hovey v. Hob-

113 111. 425; Carter v. Beckwlth, 128 son, 53 Me. 453, 89 Am. Dec. 705;

N. Y. 312; Teegarden v. Lewis, 145 Hughes v. Jones. 116 N. Y. 67.

Ind. 98; Stockmeyer v. Tobin, 139 =^ Davis v. Lane, 10 N. H. 156.

U. S. 176. ==Ch. xviii, § 481, p. 610 (7th ed.).



§ 40 PRINCIPAL AXD AGENT. 30

supervened would still have a right to act. * * * The defendant
became insane and was unable to withdraw the authority which he
had conferred upon his wife; he may be an innocent sufferer by his
conduct, but the plaintiff who dealt with her bona fide is also innocent,
and where one of two persons, both innocent, must suffer by the
wrongful act of a third person, that person making the representa-
tion which, as between the two, was the original cause of the mischief
must be the sufferer and must bear the loss."^®

§ 40. Drunkards as principals. — A person who is at the time of
the execution of a contract in a state of intoxication may avoid such
contract, if at the time of making the same his reason was so far
dethroned as to render him incapable of knowing what he was doing.^®^
In such cases the contract is not void, but voidable only, and before
the person wishing to avoid it upon that ground can do so he must
offer to restore whatever was received in consideration thereof.^'^
Intoxication, when it totally incapacitates, will avoid the contract,
it being only a species of mental unsoundness. But drunkenness, at
the time of the execution of the contract, will not generally avoid it,
if the party was not wholly incapacitated and no unfair advantage was
taken of him, or if the other party to the contract did not procure the'
intoxication in order to induce him to make the contract.^* But if
the party was so intoxicated as to render him mentally incapable of
contracting, it will be a good defense to an action on the contract.^*
And where the party's mental capacity has been so far impaired from
habitual drunkenness as to render him irresponsible, he may avoid
the contract.*'' The principle here declared applies to a contract of
agency as well as to other contracts. A party making such a eon-
tract while in an intoxicated condition may ratify the same when
he becomes sober.*^ A person is in a state of intoxication, or drunk,
in a legal sense, when he is so far under the influence of intoxicating
liquor that his judgment is impaired by the liquor. "Drunkenness
is that effect produced on the mind, passions or body by intoxicants

^"Drew V. Nunn, L. R. 4 Q. B. D. ^* Rodman v. Zilley. 1 N. J. Eq.

661. 320; Campbell v. Ketcham. 4 Ky.

^'^a See Arnold v, Hickman, 6 Munf. 406.
(Va.) 15. ^'"Jenner v. Howard, 6 Blackf.

'" Williams v. Inabnet, 1 Bailey (Ind.) 240; Bush v. Breinig, 113 Pa.

(S. C.) 343; McGuire v. Callahan, 19 St. 310, 57 Am. Dec. 469.
Ind. 128; Joest v. Williams, 42 Ind. *<> Gates v. Meredith. 7 Ind. 440.
565. 13 Am. Rep. 366; Bursinger v. "Mansfield v. Watson, 2 Iowa

Bank of Watertown, 67 Wis. 77; Mc- 111; Carpenter v. Rodgers, 61 Mich.

Clain v. Davis, 77 Ind. 419. 384.



31 COMPETENCY OF PARTIES. § 41

taken into the system, which so far changes the normal condition,
as to materially disturb and impair the capacity for health, rational
action and conduct; which causes abnormal results, or such as would
not ensue in the absence of intoxicants — the changed effect produced
by the immoderate or excessive use of intoxicants, as contrasted with
normal status and conduct."*- The ratification or disaffirmance of
the contract of a lunatic or drunkard may be by the guardian or
committee ;*^ or, after his death, if a deed, by his heirs.** WTien the
guardian of a habitual drunkard has been discharged, it will he pre-
sumed that the ward has reformed.*^ If the contract was made
during a sober interval, it is binding.*''

§ 41. Corporations as principals. — A corporation is, from its very
nature, a competent principal, for it is inconceivable how it could
perform any of its functions except through the media of its officers
or agents. Usually the charter or general laws under which it is
organized provide for the appointment or selection of these ; but
whether this be true or not, the election of directors, trustees and
other suitable officers or agents to govern the affairs of the company
and transact its business is a necessary incident of its corporate exist-
ence, and may be held without being expressly authorized by the act of
incorporation.*^ But when the charter or statute of incorporation
provides a certain method of election or appointment of the officers,
that method must be substantially pursued, any other rendering the
selection void.*^ Where, however, it is provided that the trustees of a
corporation shall be elected annually, the words are only directory,
and do not take away the incidental power of the corporation to elect
afterward, when the annual day has, by some means, free from design
or fraud, been passed by.*^ And where the record is sflent upon

*= State V. Savage, 89 Ala. 1, 8. *^ Walseburg Water Co. v. Moore,

''McClain v. Davis, 77 Ind. 419. 5 Colo. App. 144, 38 Pac. 60;

" Schuff V. Ransom, 79 Ind. 458. In re St. Helen Mill Co., Fed. Cas.

"Makepeace v. Bronnenberg, 146 No. 12,222, 3 Sawy. (U. S.) 88;

Ind. 243. Moses v. Tompkins, 84 Ala. 613;

^'■' Ritter's Appeal, 59 Pa. St. 9. People v. New York Infant Asylum,

^'Hughes V. Parker, 20 N. H. 58, 122 N. Y. 190; State v. McCullough,

65; Kitchen v. Cape Girardeau, etc., 3 Nev. 202; Miller v. English, 21 N.

R. Co., 59 Mo. 514; St. Andrew's Bay J. L. 317.

Land Co. v. Mitchell, 4 Fla. 192, 54 ''People v. Town of Fairbury, 51

Am. Dec. 340; Hayden v. Middlesex 111. 149; Hughes v. Parker, 20 N. H.

Turnpike Corp., 10 Mass. 397, 6 Am. 58; Beardsley v. Johnson, 1 N. Y.

Dec. 143; Kearney v. Andrews, 10 Supp. 608, 49 Hun (N. Y.) 607.

N. J. Eq. 70.



§ 41 PEIXCIPAL AXD AGEXT. 32

the subject, the presumption will be indulged that the selection was
according to the prescribed methods.^" So, where no particular mode
of making the choice is provided, if all having the right to vote have
an opportunity and the officers chosen are the choice of the majority
of those voting, the election is valid.^^ As a general rule, an agent
authorized to make a contract for a corporation must be appointed,
on the vote of the directors, but the appointment may be implied
'from the adoption or recognition of the agent's acts by the corpora-
tion or the directors.^^ And it is not generally necessary that the
vote by which the agent was appointed be recorded or entered on the
minutes, but the same may be inferred from the fact that the cor-
poration permitted him to act as such.^^ Kor is it essential that
such an agent should be appointed by an instrument under seal.^*
If the acts of an agent of a corporation were unauthorized in the
first instance, they ma}^ if within the scope of its corporate powers,
be subsequently ratified, and such ratification will cure any defects in
the appointment of the agent.^^ In the absence of express provisions
to the contrary in the charter of a mutual company, such company
possesses the power to appoint such agents as may be necessary to
transact its business ; and the members of such company are presumed
to have consented that it shall be represented by such agents or officers
as are reasonably necessary for the conduct of its business.^® The
agent may he a member of the corporation.^" But a corporation can
not be bound by its agents for acts beyond its corporate powers.^^
When the appointment of an agent of a corporation is ultra vires,
it is void and can not bind the corporation ; but where the corpora-

^'Blanchard v. Dow, 32 Me. 557. '' Fleckner v. Bank of U. S., 8

"Philips v. Wickham, 1 Paige (N. Wheat. (U. S.) 338; Church v. Ster-

Y.) 590. ling, 16 Conn. 388; Home Life Ins.

== Equitable Gas Light Co. v. Bal- Co. v. Pierce, 75 111. 426.

timore Coal-Tar & Mfg. Co., 65 Md. =" Protection Life Ins. Co. v. Foote,

73, 3 Atl. 108. 79 111. 368.

=^ Alabama, etc., R. Co. v. Kidd, 29 ■' Stoddert v. Port Tobacco Parish,

Ala. 221; Wood v. Wiley Const. Co., 2 Gill & J. (Md.) 227.

56 Conn. 87; Planters' Bank v. Biv- "^^ Hayden v. Middlesex Turnpike

ingsville Cotton Mfg. Co., 10 Rich. Co., 10 Mass. 397, 6 Am. Dec. 143;

L. (S. C.) 95. Sandford v. McArthur, 18 B. Mon.

'■^Fleckner v. Bank of U. S., 8 (Ky.) 411; Gregory Co. v. Raber. 1

Wheat. (U. S.) 338; St. Andrew's Colo. 511; Ryan v. Manufacturers',

Bay Land Co. v. Mitchell, 4 Fla. etc.. Bank, 9 Daly (N. Y.) 308.
192, 54 Am. Dec. 340.



33 COMPETENCY OF PARTIES. § 42

tion has dorived a benefit from the services of such agent, the cor-
poration may, in some cases at least, be liable on a quantum nieruit.^^

^ 42. Partnerships as principals. — The law of partnership is a
branch of the law of principal and agent."" Each partner is a prin-
cipal, as well as an agent of the other partners. Besides, each partner
has the implied authority to appoint such agents or servants as may be
necessary for the proper conduct of the business.®^ An agent thus
appointed is an agent of the firm and not an agent of the individual
partner merely.®- Such an agent, when acting within the scope of
his authority, may bind the principal firm to the same extent as if
such principal were a natural person.®^

§ 43. Unincorporated societies as principals. — An unincorporated
society, such as a church, lodge or political organization, can not be-
come a competent principal. It is not a legal entity. But if all the
members have acted jointly in the appointment of an agent they
may be held liable as joint principals for the acts of such agent.''*
Those who appoint the agent will, of course, be liable. The converse
of the proposition is also true, that those not joining in the appoint-
ment will not be liable.

§ 44. Alien enemies as principals. — A citizen or subject of a coun-
try at war with the United States can not lawfully appoint an agent
in the United States during the existence of hostilities.®^ But if the
relation of principal and agent already existed, prior to the JDeginning
of the war, it will not be terminated by reason of the breaking out of
the war between the two countries, provided it does not involve any
communication across the line, and it can be shown that the agency
continued by the mutual consent of the parties thereto. ®®

§45. Joint principals. — As shown in the case of unincorporated
societies, two or more persons having authority to do so may jointly

^^ Slater Woollen Co. v. Lamb, 143 '- Johnston's Ex. v. Brown. 18 La.

Mass. 420. Ann. 330; Ayer v. Ayer, 41 Vt. 346.

^" Cox V. Hickman, 8 H. L. Cas. "^ Henderson v. San Antonio R.

268. Co., 17 Texas 560.

"^Paton V. Baker, 62 Iowa 704; '^ Ray v. Powers, 134 Mass. 22;

Durgin v. Somers, 117 Mass. 55; Newell v. Borden, 128 Mass. 31.

Harvey v. McAdams, 32 Mich. 472; "= United States v. Grossmayer, 9

Tillier v. Whitehead, 1 Dall. (Pa.) Wall. (U. S.) 72.

269; Sweeney v. Neely, 53 Mich. 421; "« 1 Am. & Eng. Encyc. L. (2d ed.)

Carley v. Jenkins, 46 Vt. 721. 943.
3 — Principal and Ageito.



§ 46 PRINCIPAL AND AGENT. 3-i

appoint an agent. They are then called joint principals. If two
or more persons are jointly interested in a business enterprise, one
of them can not appoint an agent for all except by the consent of
jjljeea jf the interest is a common one, each being authorized to act
for all, as in the case of a partnership,^^^ one may appoint an agent for
all, and the act will be binding. If, however, the interests be sepa-
rate and distinct, one can not bind the others by the appointment
of an agent.'''^

§ 46. Who may be agents — Generally. — As a general rule, any
person may be an agent except a lunatic, imbecile, or child of very ten-
der years. Hence, slaves or villains, persons outlawed or excommuni-
cated, married women, infants, and aliens may become agents for
other parties, although incapable of binding themselves by contract.®®



Online LibraryGeorge L. (George Louis) ReinhardA treatise on the law of agency in contract and tort; including special chapters on attorneys at law, auctioneers, bank officers, brokers, factors, insurance agents, traveling salesman, public agents and officers, master and servant → online text (page 14 of 82)