(a) An Agent Acts Under the Supervision of a Principal.

(b) A Tenant Is an Independent Contractor, Who Agrees to Produce Results Under His Own Supervision.

Story Case

The Southern Mills Company owned a mill located upon a stream which ran through John Fiske's land below. The mill company made a contract with Frank Bird. This contract was called a lease, the company being the lessor and Bird the lessee. Bird agreed to run the mill for a year, and to manufacture for the company from their own cotton, goods at a specified price to be paid by the company. The company reserved the control over the output. Bird agreed to keep the mill in running order, except the main gearing and the dam, which the company agreed to keep in good condition. Bird was not charged any rent. On one occasion, Bird was careless and the water escaped from the pond. The land of Fiske was, in consequence, flooded and damaged. Fiske sued the company on the ground that Bird was an agent for whose act the company was liable. The company maintained that Bird was a lessee, and that, consequently, there was no liability on their part for his acts.

Ruling Court Case. State Vs. Page, Volume 40 American Decisions, Page 167

The Charleston Hotel Company owned a furnished hotel in the City of Charleston. It entered into a contract with Page, the significant provisions of which follow: The company agreed "to let the hotel to Page for a term of seven years." Page, "as landlord," agreed to provide for the hotel and to contract no debts on account of the concern without the consent of the directors of the company. The company also agreed to pay Page a certain sum annually as compensation.

The sheriff went to the hotel to levy execution upon the furniture as property of the hotel company. Page contended that he was lessee of the property and that the sheriff had no right to touch it. He was indicted for resisting the sheriff in levying the execution. If he was a lessee, he was justified in resisting the officer.

Justice Armstrong gave the decision: The Court held that Page was a mere agent, and that he had no right to resist the sheriff in levying execution upon the hotel company's property.

The Court said that the substance of the relationship must be looked at, and though the words used might in some ways resemble relation of landlord and tenant, the facts showed that it was merely an agency, since Page acted under the control and supervision of the directors. The verdict was pronounced against the defendant.

Ruling Law. Story Case Answer

A tenant is one who engages from another, called the landlord, the use of property of the latter for a limited period of time. Generally, in such a case, the landlord is not liable for the acts of the tenant. Ordinarily a tenant, as such, has no power to charge the landlord with any liability.

Very little difficulty will be encountered in determining, in a given case, the distinguishing feature between these two relations. Sometimes, however, a person wishes to engage in some business, the ultimate success of which is doubtful. He wishes to get the profits, if any accrue, but he desires to escape any possible liabilities from the business. With this end in view he may purport to lease the business to some irresponsible third person.

Though the intention of the parties will ordinarily control in determining the nature of the relation, the relation must be assumed in good faith and with no aim of defrauding third persons. If it appears that the alleged lessee is paying only a nominal rent and that the alleged lessor is really in control, and getting the profits of the business, the courts do not hesitate to disregard their nominal intention and hold that it is in fact an agency.

This is the situation in the Story Case. Bird is in fact an agent acting under the control of the company. Therefore the company is liable for his carelessness.