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.
Contracts entered into on behalf of the government or a public corporation by some one who claims to act as an officer or agent thereof presents some marked points of contrast to ordinary contracts of private agents. If, as is usually the case, the powers and duties of the public agent are prescribed by law, all who deal with such agent are charged with knowledge of his powers, whether they have such knowledge in fact or not.1 There can, therefore, be no agency by estoppel in such cases.2 No liability, therefore, is imposed upon a government or public corporation by reason of a contract entered into on its behalf by an agent acting in excess of the authority conferred upon him by the law.3 Hence if a council has no authority to let contracts, an ordinance directing to whom a contract for printing shall be let is void.4 A statute providing that selectmen shall have their expenses when engaged in public business gives them no power to bind the city by a contract for their meals.5 So a contract entered into by a mayor without authority does not bind the city.6 Power to collect convict hire is not power to accept notes therefor and then to bind the state by indorsing them over.7 If a clerk is authorized to indorse on mortgage bonds issued by a water-works company the statement that the city will pay interest on such bonds in lieu of hydrant rentals up to the amount of three thousand dollars, the amount of rentals contracted for, his certificate that the city will pay interest as it matures does not impose any liability on the city.8 If a board or other corporate body has power to bind the public corporation it must do so by action as a board. Hence a member of a council has no authority to retain an attorney for the city.9 So knowledge of a member of a school board that a given surety has signed the treasurer's bond to take effect only if other sureties sign is not notice to the board of that fact, where such member acquired such knowledge while acting in a private capacity to secure sureties for such bond.10 The government or municipality may be liable for the benefits received by reason of the unauthorized contract, which it would not have received otherwise. A board empowered to take charge of some municipal work and pay for the same out of certain funds has no power to bind the city generally by its contracts for machinery and the like, but it may make valid charges against such funds.11 There is no liability for benefits which are no greater than those which would have been received had the officer done his duty. Thus an agent who was authorized to collect convict-hire in money accepted notes therefor, payable to the state, and indorsed them, depositing the money thus received to the credit of the state. It was held that on non payment of the notes the state was not liable as indorser, since the agent had no authority so to indorse; nor was it liable in quasi-contract for money had and received.12 The rule that a contract by an unauthorized officer has no binding effect operates against the municipality as well as for it. If a contract is tendered which is not approved by the council as required by statute, such contract has no validity. Therefore if a bidder refuses to accept such contract he does not thereby forfeit a deposit made by him to secure his bid.13 Since all who deal with public agents are charged with knowledge of their authority, the agent is not personally liable if, acting in good faith, he exceeds his authority. Thus certain bonds were issued under a statute which was subsequently held unconstitutional. It was held that no liability attached personally to the public agents who sold such bonds, received the money therefor, and applied it as provided for by such statute.14 A contract entered into by a de facto public officer is as valid as if he were also an officer de jure.15
2 Read v. Buffurm, 79 Cal. 77; 12 Am. St. Rep. 131; 21 Pac. 555.
3 Friedman v. Lesher, 198 111. 21; 92 Am. St. Rep. 255; 64 N. E. 736 (given by the vice-president, the president being dead).
4 Trent v. Sherlock, 26 Mont. 85; 66 Pac. 700 (given by the general manager).
5 Fitzhugh v. Land Co., 81 Tex. 306; 16 S. W. 1078.
1 Madison v. Newsome, 39 Fla. 149; 22 So. 270; Fries v. Porch, 49 Ia. 351; Marshall County v. Cook, 38 111. 44; 87 Am. Dec. 282; Mc- Caslin v. State, 99 Ind. 428; Jewell Belting Co. v. Bertha, - Minn. - ; 97 N. W. 424; Lincoln v. Mc-Neal, 60 Neb. 613; 83 N. W. 847; Smith v. Epping, 69 N. H. 558; 45 Atl. 415; Day, etc., Co. v. State, 68 Tex. 526; 4 S. W. 865.
2 Mullan v. State, 114 Cal. 578; 34 L. R. A. 262; 46 Pac. 670; Wormstead v. Lynn, 184 Mass. 425; 68 N. E. 841; Dube v. Peck, 22 R. I. 443, 467; 48 Atl. 477; Carolina National Bank v. State, 60 S. C. 465; 85 Am. St. Rep. 865; 38 S. E. 629.
3 Mulnix v. Ins. Co., 23 Colo. 71; 33 L. R. A. 827; 46 Pac. 123; Dris-coll v. New Haven, 75 Conn. 92; 52 Atl. 618; Fairplay School Township v. O'Neal, 127 Ind. 95; 26 N. E. 686; Goddard v. Lowell, 179 Mass. 496; 61 N. E. 53; Board of Education v. Robinson, 81 Minn. 305; 83 Am. St. Rep. 374; 84 N. W. 105; Carolina National Bank v. State, 60 S. C. 465; 85 Am. St. Rep. 865; 38 S. E. 629; Nash v. Knox-ville, 108 Tenn. 68; 64 S. W. 1062; McCurdy v. Rogers, 21 Wis. 197; 91 Am. Dec. 468.
4 Goddard v. Lowell, 179 Mass. 496; 61 N. E. 53.
5 Heublein v. New Haven, 75 Conn. 545; 54 Atl. 298.
6 Indiana Road - Machine Co. v. Sulphur Springs (Tex. Civ. App.), 63 S. W. 908; (City of) Tyler v. Adams (Tex. Civ. App.), 62 S. W. 119.
7 Carolina National Bank v. State, 60 S. C. 465; 85 Am. St. Rep. 865; 38 S. E. 629.
8 Painter v. Norfolk, 62 Neb. 330; 87 N. W. 31.
9 Root v. Topeka, 63 Kan. 129; 65 Pac. 233.
10 Board of Education v. Robinson, 81 Minn. 305; 83 Am. St. Rep. 374; 84 N. W. 105.
11 Kerr v. Bellefontaine, 59 O. S. 446; 52 N. E. 1024.
12 Carolina National Bank v. State, 60 S. C. 465; 85 Am. St. Rep. 865; 38 S. E. 620.
13 Chicago, etc., Co. v. West Bay
City. 129 Mich. 65; 87 X. W. 1032.
14 Powell v. Heisler, 45 Minn. 540; 48 N. W. 411.
15 Waite v. Santa Cruz. 184 U. S. 302; Lake Charles, etc., Co. v. Lake Charles, 106 La. 65; 30 So. 289.