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The Duties and Liabilities of Third Persons to the Principal


THE DUTIES AND LIABILITIES OF THIRD PERSONS TO THE PRINCIPAL. The relation being created for the benefit of the prin cipal, acts of the agent within his employment being in reality the acts of the principal, it follows that a principal may avail himself of, and may sue upon, all contracts made by his agent, whether his name has been disclosed or not, unless, 1, The contract is in the agent's own name and under seal (Berkeley v. Hardy, 5 B. & C. 355); 2, Where the contract is in the agent's name, is executory and involves some considerations personal to the agent (Eggleston v. Boardman, 37 Midi. 14; Boston Ice Co. v. Potter, 123 Mass. 28); 3, Where the other party to the contract, with knowledge of the real principal, has elected to deal with the agent exclusively (Winchester v. Howard, 97 Mass. 3o3); 4, Where the agent has a lien upon or special in the subject-matter of the agency, exceeding or equal ing its value. (Hudson v. Granger, 5 B. & Ald. 27.) But the right of the principal to sue upon the con tracts made by his agent is subject to the following limitations: 1. That defenses based upon the fraud of the agent committed within the scope of his authority, are avail able against the principal. (Mundorff v. Wichersham, 63 Pa. St. 87; Law v. Grant, 37 Wis. 548.) 2. That where the agent has been allowed to con tract as principal, the real principal takes the contract subject to all defenses, whether equitable or legal, which the other party, who has had no notice of the agency, might have asserted had the agent been, in fact the principal.

TO REPAY MONEY SECURED FROM THE AGENT. Third persons are liable to the principal for money- obtained from his agent through fraud, extortion, and the like, or which was paid tltem by- the agent through mis take. (Sadler v. Evans, 4 Burr. 1984; Holman v. Frost, 26 S. C. 29o.) So, money belonging to the principal, in the hands of the agent, is considered as a trust; vvhich trust can only be fulfilled by the appropriation of the fund to the object or purpose intended, unless the principal othenvise directs. If such a fund is divested from its appropriate use, a court of equity' will follow it as long as it can be identified, notwithstanding it may have changed its form any number of times, until it comes into the possession of a holder for value, who has taken it without notice of the trust. Nor does it make any difference that the person who receives such fund, or any portion of it, is ignorant of its nature or innocent of wrongdoing: equity will restore the fund to its proper channel, unless it meets the superior equity of a bona fide holder for value.

agent, fund, contract and unless