Story Case

A statute of the State of Kansas provided that if any agent shall neglect or refuse to deliver to his employers on demand, money which should be turned over to such employers, then the agent should be guilty of embezzlement. John Abbott, a private banker, was employed by Simon Bellows, for a consideration, to keep custody of a certain sum of money, to pay out the money as Bellows directed, and render an account to Bellows at the end of each month. Six months after this agreement was made Bellows demanded the balance held, and was refused payment. Abbott was thereupon indicted under the above statute. His defense is to the effect that he was not an agent, but a debtor of Bellows. "What should be the decision of the court?

Ruling Court Case. Sternaman Vs. Metropolitan Life Insurance Company, Volume 57 Of The Lawyers' Reports Annotated, At Page 319

In this case it appears that Sternaman made an application to the Metropolitan Company for insurance upon his life. The application consisted of two parts, A and B. Part A contained questions and answers concerning the age, occupation and family history of Sternaman. Part B was entitled: "Statements made to the Medical Examiner", and consisted of about a hundred questions in fine print relating to the health of the applicant, Sternaman. At the close of these questions and answers there was an agreement that the medical examiner was the agent of the applicant, and not of the company. It appears that Sternaman had answered correctly every question which was asked him by the medical examiner, but that the medical examiner had not correctly set them down in the application.

This was an action by the beneficiary of Sternaman upon the policy. The right to get the insurance turned mainly upon the question as to whether the medical examiner was the agent of the applicant or of the company.

Justice Vann, rendered the decision.

The Court held that he was the agent of the company. He was under a contract to do certain work for the company; he was under its control and direction, from it received his authority and compensation. From the applicant he received nothing, and to him sustained no relation.

The judgment of the Court was for Sternaman, the plaintiff, since the wrong was not committed by his agent, but by the agent of the insurance company.

Ruling Law. Story Case Answer

From the standpoint of a business man, there probably is no other branch of the law so important, as that commonly termed: "The Law of Agency". Time was when business relations were rather simple, and in those times the functions to be performed by an agent were not many. As business relations became more complex the functions of an agent increased.

On the very threshold of the subject it must be asked: "What is agency?"

(1) Agency is a relationship. By this is meant that the parties are so related to each other that certain mutual rights and duties spring up which never existed before the creation of the relationship.

(2) This relationship exists between one person called the principal and another called the agent. In other words, A, who wishes to get something done, engages B to do it for him. The former is called the "principal", and the latter the "agent".

(3) This is a relationship assumed by agreement of the parties to it. It is obvious that one may not go out and act as agent for another without the consent of the latter. Nor is it necessary for a person to act as agent unless he chooses to act, and act for a particular person.

(4) This relationship gives to the agent the power to represent and act for the principal, in dealings with third persons. This needs no further comment than to say that so long as the agent acts within the scope of his authority the rights and liabilities of the principal are the same as if he himself had conducted a given transaction.

Having thus examined in certain details the constituent elements of this relationship, let us sum them up in a definition: "Agency is a relationship assumed by agreement of the parties thereto, which gives to one person, called the agent, the power to represent another person, called the principal, in dealings with third persons."

In the Story Case, Abbott is the agent of Bellows because he is employed by the latter and works under his control. Therefore his defense is not good.