The question considered in the preceding section has occasionally been presented in cases of instruments under seal executed on behalf of a partnership but without the express authority of all the partners. At the earlier common law the authority to seal had to be under seal, but it is said to be now well established, in most of the United States, that a partnership will be bound by a deed executed by one partner on its behalf, provided such execution is supported by either a previous parol authority or a subsequent parol ratification.2 If neither express authority nor express ratification by all the partners can be established, the contract is inoperative as a firm engagement, but the firm is liable to the extent of the benefit resulting from the other party's performance:
1 Three years before the decision of Otis v. Inhabitants of Stockton, the Supreme Court of Maine, in a case of almost identical facts, Billings v. Inhabitants of Monmouth, 1881, 72 Me. 174, allowed a recovery.
2 Parsons, "Partnership," (4th ed.) Sec. 122 n.
Van Deusen v. Blum, 1836, 18 Pick. (Mass.) 229; 29 Am. Dec. 582: Debt against a partnership upon a contract under seal for building a bridge by the plaintiff, with counts for labor performed and materials furnished. It was held that, although the plaintiffs were not entitled to judgment on the contract because the member of the firm who executed it had no authority to bind the partnership by an instrument under seal, they could recover against the firm on the counts for labor and materials. Morton, J. (p. 231): "The plaintiffs undertook to execute a contract between themselves and the company [partnership]. But there being no such contract in existence, they are left to resort to their equitable claim for their labor and materials. So far as they benefited the company, the plaintiffs are entitled to recover against them." 1
In some cases the right to recover has been denied:
Bond v. Aitkin, 1843, 6 Watts & S. (Pa.) 165; 40 Am. Dec. 550: Debt on a sealed note alleged to have been executed by John and James Aitkin as partners, with an additional count for money lent. The signature, "John and James Aitkin," and the seal had been attached by John, but the firm had received the benefit of the proceeds. Sergeant, J. (p. 168): "On the additional count, we think the plaintiff has not shown a right to recover. Where the bond of one of the partners is taken for an antecedent partnership debt, it may be considered either as payment and extinguishment of such debt, or only a collateral security, according to the nature of the transaction and the circumstances attending it. But where there is no antecedent debt, but the bond of one of the partners is taken at the time money is loaned to the partnership, and as the consideration for loaning the money, it can hardly be treated as a collateral security. It must be considered as all one transaction, and the bond as the only security contemplated; unless, perhaps, there were strong and positive evidence to show an express agreement to the contrary by all parties. If so, then in this case the bond was the only debt; the plaintiff, if he recover at all, must recover on it, and not on the money counts." 1
1 Accord: Walsh v. Lennon, 1880, 98 111. 27; 38 Am. Rep. 75; Daniel v. Toney, 1859, 2 Metc. (59 Ky.) 523 ; Hermanos v. Duvigneaud, 1855, 10 La. Ann. 114. And see Moore v. Stevens, 1883, 60 Miss, 809, 816; Despatch Line v. Bellamy Co., 1841, 12 N. H. 205, 236; 37 Am. Dec. 203.
These decisions appear to rest upon the theory that since the contract is binding upon the partner who executes it, and therefore the party dealing with the unauthorized agent actually acquires a contractual right against some one, no quasi contractual right can arise. The conclusion, it is believed, is erroneous. For, while it is true that a contractual right is acquired, it is not the contractual right contemplated or relied upon. The contract is entered into in the belief that a right is thereby acquired against the partnership, and the benefit of performance is conferred upon the partnership in reliance upon that belief. A right against one member of the partnership only is an entirely different thing, and may be much less valuable if not entirely worthless. The element of misreliance is just as truly present in such a case as in one in which no contract right whatever is acquired.2
1 Accord: Morris v. Jones & Spence, 1846, 4 Harr. (Del.) 428; Spear v. Gillet, 1830,1 Dev. Eq. (16 N. C.) 466; Waugh v. Carriger, 1826, 1 Yerg. (9 Tenn.) 31. And see Galt v. Calland, 1836, 7 Leigh (Va.) 594.
2 Professor Keener, in criticism of Bond v. Aitkin, supra, says (" Quasi-Contracts," p 327): "Why should the plaintiff be denied a right in quasi-contract because of the right existing under the law to sue one of a firm, not as a member of the firm, but as an individual, on a contract which was intended by both parties to be a firm contract only, binding the firm as such, and constituting the plaintiff not an individual but a firm creditor ? Clearly, as to the plaintiff there has been a failure of consideration, in that he has not received that for which he paid his money. The plaintiff intended to receive from the defendants against whom he brought an action a contract giving him a right to call upon them for an equivalent for that which both in fact received from him. The plaintiff having delivered to the defendants what they desired, why should the defendants, because the plaintiff received a contract unauthorized in form, be allowed to keep without compensation that for which they expected to pay, when they received it. The plaintiff did not intend to treat with the acting partner as an individual simply;
Where the agent who executes the sealed instrument without proper authorization is not one of the principals as well, he is not personally bound unless the instrument contains apt words for that purpose.1 Neither the principal nor the agent being bound, the instrument is a nullity, and the doctrine of Bond v. Aitkin, supra, cannot be invoked to prevent a recovery in quasi contract.2
Closely resembling the case of an instrument under seal executed by an agent without formal authority is that of an instrument executed by an agent in such a manner as to defeat its purpose. Thus, the agent may fail to indicate on the face of the instrument that he acts in a representative capacity; or, while evincing representation, he may seal the instrument with his own seal instead of the seal of his principal. In neither case is the principal bound by the instrument; in both, if he receives a benefit conferred in the belief that he is bound, he should pay a reasonable price therefor.3