Sec. 251. General Statement

If a broker commits a fraud in the course of his employment he is liable and so is his principal. (Sec. 252-255.)

All persons who act for or in the name of the owner in bringing about the transaction must be deemed his agents where he accepts the fruits of their efforts, and the owner may not, even though innocent, receive the benefits and at the same time disclaim responsibility for the fraud by means of which they arose. (Sec. 254-256.)

Sec. 252. Misrepresentations By Brokers And Agents

In case of fraud on the part of agent or principal, there is always more or less difficulty in procuring the proof necessary to establish the conditions, or in determining from the facts presented whether or not fraud was practiced. These are, however, matters of evidence. What is, and what is not considered fraud in real estate transactions is discussed later.1

Where the vendor himself makes representations and the elements of fraud are present, no serious difficulties present themselves with respect to the substantive law of fraud. Where, however, the misrepresentations are not made by the vendor himself, a question may arise. To what extent is he liable for fraud committed not by himself personally but by others in some way connected with the transaction? Of course, to incur liability a defendant need not make false representations personally. If he authorized and caused them to be made it is enough.2 "If the agent commits a fraud in the course of his employment, he is liable, and so is his principal. If he commits a fraud outside the scope of his authority, he would be liable but not his principal."3 In Ripy v. Cronan, 115 S. W. 791 (Ky. 1909), it was said that in the absence of any confidential relation between the broker and intending purchaser, or fraud to prevent inquiry or investigation by such purchaser, a real estate broker cannot be held liable for representing to an intending purchaser that the owner would not accept less than the sum named by the broker for the premises, though the owner had in fact agreed with him to sell at a lower figure.

1 See Chs. XXIX-XXXIII infra.

Sec. 253. When Vendor Is Liable For Broker's Representations

There are cases which hold that, "As a general proposition, a principal is not responsible for the deceit practiced by his agent, unless there is something in the nature of the engagement, the terms of the employment, or the powers conferred, broad enough to include a power on the part of the agent to deal with the property in such manner that the principal, in good morals and equity, ought to be bound by what the agent may have said. There are many cases which hold the principal responsible for the fraud and misrepresentation and acts of the agent when he accepts the fruits of the contract, and refuses to surrender. As the cases put it, he may not be permitted to reap the harvest and refuse to pay for the seed. When those decisions are examined, it will be seen there was an attempt on the part of the vendee to rescind the sale, and, the vendor refusing, he was held liable for the representations. In all of them the responsibility of the principal is put upon this basis. Where, however, there is no attempt on the part of the vendee to rescind, but he affirms the sale, he can bring his action for deceit only against the agent who has been guilty of the misrepresentations, unless he is able to trace some connection between the principal and the agent, and thereby charge the former with responsibility for what the agent may have said or done. An innocent principal, who has simply authorized an agent to sell property, cannot be charged in an action of deceit for the agent's wrongs unless in some manner he be connected with them. This distinction is recognized, and the doctrine commends itself to our judgment."4

2 Brackett v. Griswold, 112 N. Y. 4G7 (1889).

3 Clark on Contracts, 745; Rhoda v. Annis, 75 Me. 17 (1883); Brauckman v. I.eighton. 60 Mo. App. 41 (1894) ; Farris v. Gilder, 115 S. W. 645 (Tex. 1909). See also Chs. XXVII, XXVIII infra.

The courts are not, however, unanimous in thus restricting the liability of the principal as will be seen by an examination of the succeeding sections. On the contrary, it has been said that the current of authority appears to be in favor of discarding all such distinctions and holding the principal liable at law and in equity alike for the frauds of his agent or servant in the course of employment, provided, of course, they were committed within the scope of authority of the agent and in the interest of the principal.5