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.
Whether one who accepts a payment is authorized to bind the creditor by the receipt thereof, is a question which depends upon the general principles of the law of agency, including estoppel.1 If authority is given to the agent to accept payment, payment is complete and operative when made to the agent without regard to the ultimate disposition of the fund.2 If a public corporation has power to appoint an agent to receive payments, it is bound by payments made to him, even under a contract which provides in general terms that money which has been advanced must be paid into the treasury of such corporation.3 If one who claims to act as agent for the creditor has received money from the debtor and has embezzled it, it is said that subsequent authority from the creditor to him to collect the debt has no effect, since the agent has authority under such grant of power to receive nothing but money in payment of the debt; and he can not receive on behalf of the principal the claim of the debtor against the alleged agent for the embezzlement of such fund.4
1 0 Buchanan v. Hicks, 98 Ark. 370, 34 L. R. A. (N.S.) 1200, 136 S. W. 177.
11 Buchanan v. Hicks, 08 Ark. 370, 34 L. R. A. (N.S.) 1200, 136 S. W. 177.
12 Rasmussen v. Carbon County, 8 Wyom. 277, 44 L. R. A. 205, 56 Pac. 1008.
Contra, Coughlin v. McElroy, 74 Conn. 397, 92 Am. St. Rep. 224, 50 Atl. 1025. (An action by the de jure officer against the de facto officer.)
13 Bull v. Fuller, 78 Ia. 20, 16 Am. St. Rep. 419, 42 N. W. 572.
14 Lopez v. United States, 24 Ct. CI. 84, 2 L. R. A. 571.
1 See ch. LIV.
2 Seattle v. Stirrat, 55 Wash. 560, 24 L. R. A. (N.S.) 1275, 104 Pac. 834; Lovett v. Eastern Oil Co., 68 W. Va. 667, 70 S. E. 707; Golden v. O'Connell, 76 W. Va. 282, 2A.LR. 460, 85 S. E. 533.
See also, Sec. 1751 et seq. 3 Seattle v. Stirrat, 55 Wash. 560, 24 L. R. A. (N.S.) 1275, 104 Pac. 834.
If the creditor has acquiesced in the assumption of authority of another to accept payment, the creditor is bound by payments made to such person.5 If the assignee of a number of debts has permitted the assignor to receive payment thereon, he is bound by payments made to the assignor.6 If a broker has been permitted to represent the creditor throughout the transaction and to receive interest thereon, the principal is bound by payment to such broker.7 It is said, however, that acquiescence in the receipt of payments of interest does not estop the creditor from denying authority to receive the principal.8 The possession by the alleged agent of securities may operate so as to estop the principal from denying that the agent had authority to accept payment.9 The fact that the agent has not the securities in his possession is not of itself conclusive as to his lack of authority to accept payment.10
Payment to an unauthorized agent does not operate as a discharge if such agent does not pay over the fund to his principal and if no estoppel exists.11 If an agent is not authorized by the creditor to discharge a debt, his assumption of a debt due from a third person to his principal does not operate as a discharge thereof.12 If an agent authorized to collect overdue interest, does not have possession of the instrument evidencing the indebtedness, and has no authority to receive payment of the debt, payment to him is not a discharge. The bank at which a note is made payable is not thereby made an agent of the creditor. Accordingly, a deposit in such bank by the debtor for the purpose of paying such note is not of itself payment.13 A deposit by a debtor in a bank to the account of his creditor, is not payment unless the creditor consents thereto, since the bank is the agent of the debtor.14
4 Gallagher v. Conner, 138 La. 633, 70 So. 539.
5 City Bank v. Thorp, 78 Conn. 211, 61 Atl. 428; Harrison National Bank v. Austin, 65 Neb. 632, 101 Am. St. Rep. 639, 59 L. R. A. 294, 91 N. W. 540; Campbell v. Gowans, 35 Utah 268, 23 L. R. A. (N.S.) 414, 100 Pac. 397; Weigell v. Gregg, 161 Wis. 413, L. R. A. 1916B, 856, 154 N. W. 645.
6 City Bank v. Thorp, 78 Conn. 211, 61 Atl. 428; Weigell v. Gregg, 161 Wis. 413, L. R. A. 1916B, 856, 154 N. W. 645.
7 Campbell v. Gowans, 35 Utah 268, 23 L. R. A. (N.S.) 414, 100 Pac. 397.
8 Hoffmaster v. Black, 78 O. S. 1, 21 L. R. A. (N.S.) 52, 84 N. E. 423.
9 Marling v. Nommensen, 127 Wis. 3G3, 115 Am. St. Rep. 1017, 106 N. W. 844 [sub nomine, Marling v. Milwaukee Realty Co., 5 L. R. A. (N.S.) 412].
See also, Sec. 1751 et seq. and Sec. 1760.
1 0 Harrison National Bank v. Austin, 65 Neb. 632, 101 Am. St. Rep. 639, 59 L. R. A. 294, 91 N. W. 540; Campbell v. Gowans, 35 Utah 268, 23 L. R. A. (N.S.) 414, 100 Pac. 397.
1 1 Piano Mfg. Co. v. Doyle, 17 N. D. 386, 17 L. R. A. (N.S.) 606, 116 N. W. 529; Hoffmaster v. Black, 78 O. S. 1, 21 L. R. A. (N.S.) 52, 84 N. E. 423.
1 2 Plano Mfg. Co. v. Doyle, 17 N. D. 386, 17 L. R. A. (N.S.) 606, 116 N. W. 529.
An agent authorized to receive payment has no authority to accept payment in anything but money. Hence, he can not receive corporate stock.15
Payment made in accordance with the terms of the original contract operates as a discharge, even if it was made in fact to one who is not authorized to receive it.16 If a contract under which money is deposited to a savings account provides that payment may be made to any one who produces the pass-book, payment made to one who produces the pass-book operates as a discharge in the absence of negligence on the part of the bank, although such person had no right to the possession of the pass-book and had no right to receive such payment.17