Sec. 262. Liability Of Principal For Agent's Contracts

The liability of the principal on contracts made by an agent depends upon the authority of the agent. The authority may be real or only apparent; the agent may be a general agent or a special agent, and upon these conditions depend the determination of whether or not the agent exceeded his authority.5

Where a broker contracts as agent for a principal who is named, the principal is liable to the party with whom the contract is made if the agent acted within the scope of his actual authority, or if the agent acted within an apparent authority, with which he was clothed by the principal, even though the act be contrary to private instructions and limitations not known to the other party.6

"It is a general principle of law of agency that a principal is not bound by the acts of the agent not within the actual or apparent scope of the agency, simply because the agent falsely asserts that they are within it."7

"If the agency is special, and is known, it is the duty of the person dealing with the agent to inquire into the nature and extent of the authority conferred, and to deal with the agent accordingly. Where the special character of the agent is not known, and the principal has clothed the agent with apparent powers, strangers, in dealing with the agent, may assume that such apparent powers are possessed. The principal cannot, by private communications with his agent, limit the authority which he allows the agent to assume."8 The question of the authority of a real estate broker to enter into a contract of sale has already been presented.9

"The authority of a general agent may be more or less extensive; and he may be more or less limited in his action within the scope of it. The limitation of his authority may be public or private. If it be public, those who deal with him must regard it, or the principal will not be bound. If it be private, the principal will be bound, when the agent is acting within the scope of his authority, although he should violate his secret instructions. A special agent is one employed for a particular purpose only. He also may have a general authority to accomplish that purpose, or be limited to do it in a particular manner. If the limitation respecting the manner of doing it be public or known to the person with whom he deals, the principal will not be bound if the instructions are exceeded or violated. If such limitation be private, the agent may accomplish the object in violation of his instructions, and yet bind his principal by his acts."10

5 See Wheeler v. McGulre, 2 L. R. A. 808 (Ala. 1888).

6 Clark on Contracts, 731. See also Ch. IV supra as to broker's authority to sign contract.

7 Benedict v. Pell, 70 App. Div. 45 (N. Y. 1902), (citing Edwards v. Dooley, 120 N. Y. 540 (1890) ).

8 Clark on Contracts, p. 734.

9 See Ch. IV supra as to broker's power to sign contract.

Sec. 263. Liability Of Undisclosed Principal

When property is sold to a person whom the vendor believes to be a purchaser, and he afterwards discovers that the person credited bought as agent for another, the vendor has a cause of action against the principal for the purchase price.11 Thus, where a person knows that the owner of a particular property will not sell to him, and therefore has another person act as agent and buy in the property in the agent's name, the agent's mind is the principal's mind in the transaction, and the principal may be held for the balance of the unpaid purchase price.12

"As a general rule, where a written agreement not under seal is made on behalf of a principal not named, and the consideration has moved from him, it is competent for the principal to bring an action in his own name on such agreement, thus made for his benefit; and, on the other hand, even when the agent may himself be liable upon a written contract, because he has failed fully to disclose that he has made it on behalf of another, the principal on whose behalf he has made it may also be liable."13

10 Bryant v. Moore, 26 Me. 86, 87 (1846).

11 Kayton v. Barnett, 116 N. Y. 625 (1889); Borcherling t. Katz, 37 N. J. Eq. 153 (1883).

12 Kayton v. Barnett, supra.

"If an agent possessing due authority makes a contract in his own name, his principal, whether known or unknown, may be sued thereon, unless from the attendant circumstances it is the clear intent of the parties that exclusive credit is given to the agent, and that no resort shall in any event be had against the principal."14 Where credit is given to an agent without knowledge that there is any principal, the principal, when discovered, may, at the election of the other party, be held on the contract if the election is exercised within a reasonable time.15

If the principal claims that the seller knew him to be such (principal) and gave credit exclusively to the agent, he assumes the burden of establishing this by clear proof, the assumption being that the credit is given to the principal.16 There are exceptions to the rule that an undisclosed principal may both sue and be sued upon a contract made in his behalf. The exceptions, so far as they affect real estate brokers' contracts, have already been noted.17