Story Case

The Eastern "Woolen Company appointed Lew Baker its western manager with offices in Chicago. Among other sub-agents Baker appointed one Briggs as salesman in Missouri, and shipped to the latter a lot of goods. Briggs sold the goods and failed to pay over the money. The company brought suit against Baker for the amount due, on the ground that Baker had no authority to appoint sub-agents. Baker's defense was that authority to appoint sub-agents was given, otherwise he could not cover the territory for his principal. Is this a good defense?

Ruling Court Case. Dorchester And Milton Bank Vs. New England Bank Volume 1 Cushing's Reports 177

The Dorchester and Milton Bank in the State of Massachusetts, having discounted a number of drafts payable in Washington, D. C, transferred them by general indorsement and without specific instructions to the New England Bank in Boston, their general agents for collection. The New England Bank, having no correspondent in Washington, transferred the drafts by a like general indorsement to the Commonwealth Bank in Boston, which was then and for some time afterwards a bank in good financial condition. The Commonwealth Bank by general indorsement sent the drafts to its correspondent, Bank of Washington, for collection.

At this point the Commonwealth Bank failed. The New England Bank demanded these drafts of the Bank of Washington, before they matured, the latter refused to deliver them up, collected them, and applied the proceeds to a balance due them from the Commonwealth Bank.

The Dorchester Bank sues for damages, alleged to have resulted from the delegation of power by the New England Bank in proceeding to collect the notes. It was contended by the defendant that the very motive of the transaction contemplates the delegation of the power to collect the drafts.

Justice Wilde delivered the opinion.

As a general rule an agent has no right to delegate his authority to a sub-agent, without the assent of his principal, but when, from the nature of the agent, a sub-agent must necessarily be employed, the assent of the principal is implied. This is such a case. Since it appears that the defendant acted in good faith and was guilty of no negligence, he is not liable.

The Court said in part: "It is argued that the employment of the Commonwealth Bank was improper, on the ground that the trust reposed in the defendant was a personal confidence, and also that a delegated authority cannot be delegated. This no doubt is generally true, but when from the nature of the agency, a sub-agent or sub-agents must necessarily be employed, the assent of the principal is implied. Such was the nature of the agency in this case. It could not have been expected that the defendants would employ one of their own officers to proceed to Washington for collection, and if the defendants employed suitable sub-agents for that purpose, in good faith, they are not liable for the neglect or default of the sub-agents."

Ruling Law. Story Case Answer

If an agent is employed to do an act or perform a mission for another, and the act or mission is of such a nature that it would not be possible for the agent personally to attend to it, he may employ sub-agents to assist him, and this, even though discretion must be exercised in the transaction. In such a case, it is said that the consent of the principal is implied. If A goes to B in Chicago and asks that B collect from C in Toronto, Canada, the very nature of the agency contemplates that B must have a sub-agent. Accordingly, unless B is expressly forbidden, he may employ X of Toronto to assist in making the collection.

In the Story Case, Baker's defense is good. The nature of the agency is such that he could not cover the territory assigned to him without appointing sub-agents to assist him. His authority to appoint sub-agents is assumed from the nature of the agency.