This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If one promises to act as agent for another without consideration for such promise, no contract exists, and the promisor may refuse to perform without incurring any legal liability,1 even if the promisee, in reliance upon such promise, has omitted to take any other steps for accomplishing the result, which thus fails.2 Thus, if gratuitous, A's promise to collect a claim,3 A's promise to effect insurance in an insurance company on property which belonged to A and B,4 or A's promise to send a policy of fire insurance by mail to the local agents of the fire insurance company, to obtain their consent to the assignment of such policy to B, the policy being left in A's possession for such purpose,5 are none of them enforceable, even if B did not know in time of A's failure to perform, and B, in reliance on A's promise, did not make any other arrangements for securing the intended result. A, who acts as steward for a horse race, gratuitously, is not liable to B, who entered a horse, if it is not shown that A entered upon the duties of his office.6 If, on the other hand, A attempts to perform his gratuitous promise to act as B's agent, A is liable for breach or default. The liability of a gratuitous agent to account to his principal is clear. Thus A agrees to secure the highest possible bounty for the enlistment of B's son, to collect it and pay it to B, is liable to B for money had and received upon A's collecting such bounty.7 It is not surprising to find that the gratuitous agent is liable for deviation from his instructions.8 A gratuitous agent who lends money in disregard of his principal's instructions as to the security to be taken is liable for such violation.9 Thus if B violates the instructions of his principal, A, and instead of taking a deed of trust from C to secure a loan made by A to € through B, B includes in such deed of trust a debt due from C to B, A may recover from B the amount which A advanced to B, in order to make such loan to C, even if B was acting without compensation.10 Where A delivered a note to B, his agent, for collection or renewal, only if security were given, and B surrendered such note to the maker, taking therefor a note without security, for a longer time, payable to B, B was held liable to A for the amount of the original note.11
18Lyte v. Peny, Dyer 49a; anonymous, Cary 9; Winkley v. Foye, 33 N. H. 171, 66 Am. Dec. 715.
1 Morrison v. Orr, 4 Ala. (3 Stew. & P.) 49, 23 Am. Dec. 319; Brawn v. Lyford, 103 Me. 362, 69 Atl. 544; Thorne v. Deas, 4 Johns. (N. Y.) 84.
2 Brawn v. Lyford, 103 Me. 362, 69
Atl. 544; Thorne v. Deas, 4 Johns. (N. Y.) 84.
3 Morrison v. Orr, 4 Ala. (3 Stew. & P.) 49, 23 Am. Dec. 319.
4 Thorne v. Deas, 4 Johns. (N. Y.) 84.
5 Brawn v. Lyford, 103 Me. 362, 69 Atl. 544.
6 Balfe v. West, 13 C. B. 466.
It seems anomalous, however, to find that if A attempts performance he is liable for negligence, even if he violates no instructions, though if he had done greater damage by not attempting performance, he would not have been liable.12 Some explanation of the anomaly may be found in the fact that in some of the cases the principal would not have suffered damage if the agent had taken no step towards performance. A gratuitous agent has been held liable for negligence in pointing out the wrong property to his principal who bought in reliance on such statement.13 In other cases, however, the injury to the principal would have been at least as great if the agent had not attempted to perform. It has been said that one who agrees gratuitously to effect insurance for another is liable for his negligence in so effecting such insurance that it was wholly void, and that a plea of want of consideration
7 Spencer v. Towles, 18 Mich. 9.
8 Passano v. Acosta, 4 La. 26, 23 Am. Dec 470; Williams v. Higgins, 30 Md. 404; Opie v. Serrill, 6 Watte & Serg. (Pa. St.) 264.
9 Williams v. Higgins, 30 Md. 404.
10 Marshall v. Ferguson, 94 Mo. App. 175, 67 S. W. 935.
11 Passano v. Acosta, 4 La. 26, 23 Am. Dec. 470. For a similar case, see Opie v. Serrill, 6 Watts & Serg. (Pa. St.) 264.
12 Wilkinson v. Coverdale, 1 Esp. 75; Johnson. v. Graham, 14 U. G. C. P. 9;
Charlesworth v. Whitlow, 74 Ark. 277, 85 S. W. 423; Battelle v. dishing, 21 D. C. App. 59. See obiter in Vickery v. Lanier, 58 Ky. (1 Met.) 133. The degree of care for which the gratuitous agent or bailee may be held does not concern us here. See discussion by Professor Beale, 5 H. L. R. 222.
13 Battelle v. Cushing, 21 D. C. 59. (On the facts, however, A might have been interested as a trustee selling the realty in question; and the erroneous location may have been the result of design and not of negligence.) was bad.14 In this case, however, the declaration was held to be insufficient for want of proper averments as to breach. So it was held that an action would lie on a gratuitous promise to effect a renewal of insurance if the agent renewed such insurance without notifying the insurance company of an assignment or mortgage of the owner's interest and securing the proper indorsement of the consent of the insurance company.15 In this case, however, the plaintiff failed to prove the promise of the defendant to effect such renewal. In some cases the gratuitous agent has received money or some other thing of value, and his liability may be explained upon the same ground as that of the gratuitous bailee.16 If a gratuitous agent receives his principal's money, he is liable for negligence with reference thereto.17 If A agrees to lend money for B upon security, gratuitously, A is liable for negligence in accepting as security stock certificates which have been altered by raising the number of shares of stock for which they were issued,18 or for making a loan without security.19 If a note is placed in the hands of a gratuitous agent, he is liable for negligence with reference thereto.20 A gratuitous agent, in whose hands a note is placed for collection, may be liable for negligently failing to bring an action thereon, until the parties thereto have become insolvent.21 A bank which collects notes without charge is liable for the negligence of the notary whom the bank employed to protest the note, whereby an indorser is released.22
It will be seen, therefore, that while there are a number of dicta to the effect that a gratuitous agent is liable for negligence or word of skill, even where he violates no instructions, and where he has received nothing of value under his employment, there is little direct authority upon the question. What there is, however, is in favor of the liability of the agent under such circumstances.
14 Johnson v. Graham, 14 U. C. C. P. 9.
15 Wilkinson v. Coverdale, 1 Esp. 75.
16 Arkansas. Charlesworth v. Whitlow, 74 Ark. 277, 85 S. W. 423.
California. Samonset v. Mesnager, 108 Cal. 354, 41 Pac. 337.
Louisiana. Durnford v. Patterson, 7 Mart. (O.S.) 460; Montillet v. Bank of United States, 1 Mart. (N.S.) 365.
Maryland. Williams v. Higgins, 30 Md. 404.
Tennessee. Anthony v. Smith, 28 Tenn. (9 Humph.) 508. See Sec. 538.
17 Samonset v. Mesnager, 108 Cal. 354, 41 Pac. 337; Williams v. Higgins, 30 Md. 404.
18Isham v. Post, 141 N. Y. 100, 38 Am. St. Rep. 766, 35 N. E. 1084 (reversed on the ground that failure to discover such alteration was not negligence as a matter of law, and that evidence tending to show that such alterations had deceived the vigilant was excluded).
19 Samonset v. Mesnager, 108 Cal. 354, 41 Pac. 337.
20 Durnford v. Patterson, 7 Mart. (O.S.) 460; Montillet v. Bank of United States, 1 Mart. (N.S.) 365; Anthony v. Smith, 28 Tenn. (9 Humph.) 508.
21 Anthony v. Smith, 28 Tenn. (0 Humph.) 508.
22 Montillet v. Bank, 1 Mart (N.S) 360.