has assumed to one of the parties an obligation of which the essence is that he should be under an obligation to the other. In Lawrence v. Fox, for example, B, the obligor, made a promise to A, and thereby assumed a duty to A; but the essence of that duty was that he should also be under a duty to C. It follows that, when B refused to perform his promise, he violated two rights at once. A's right should be enforced in any one of three ways, at his election: first, by a bill in equity to compel B to convey the fund to C, which is specific performance, or, as Professor Langdell somewhere more accurately calls it, specific reparation; second, by an action at law for damages for breach of contract, in which, however, the damages will be nominal; third, by an action for money had and received, in which event he would rescind the contract and recover the consideration paid, and this on the ground of unjust enrichment. C, on the other hand, should have either of two remedies, at his election: first, a bill in equity for specific reparation; second, an action for money had and received, which would be based, as I said before, not on the ground of unjust enrichment, but on the consensual obligation, and would be the legal counterpart of his bill in equity. It will be observed that he has no right, or rather power, of rescission. The rights in the case of a bill of exchange, or of an insurance policy, or of a trust, while differing in some details, are nevertheless open to the same general analysis. That these relations are really trilateral is shown by the fact that the obligation assumed by B cannot be released except with the consent of the third person. This is perhaps more evident in the case of a trust than in such a case as Lawrence v. Fox.

In the case of agency, the trilateral character of the relation becomes even more important than in these last cases, because the much mooted question of what constitutes an agent's authority will be found to turn on it.

Whatever else we may say about an agent's authority, it is at least coextensive with his ability legally to bind his principal. Now, in the first place, it will hardly be disputed that whatever the principal tells the agent he may do, will, when done, be legally valid as the principal's act. Judge Holmes, in an interesting article on agency, says that this is "plain good sense," introducing no new principle into the law and requiring no explanation. In

the second place, it will not be disputed that whatever the principal tells the third person his agent may do will, when done, be just as valid an act of the principal as the other. In this last case there may, or may not, be a technical estoppel; but the responsibility of the principal for his agent's acts is, under these circumstances, quite independent of that doctrine. It rests on precisely the same ground as that upon which is founded the doctrine of mutual assent in contracts generally. If an offeree says "Yes" to an offer, he thereby creates a valid legal obligation, and that too without reference to any action by the offeror in reliance upon his assent. It is quite common to call an authority of this kind, based upon representations made by the principal, an "apparent authority." The phrase is unfortunate. It seems to imply some defect of legal validity, when in truth there is none, since the principal is quite as unable to avoid the consequences of acts authorized after this fashion as he is to avoid the consequences of acts authorized in any other.

In every case of dealings with third persons through an agent these two elements will be found: the instructions to the agent, and the representations to the third person; and in hardly any case will these two be precisely identical.1 It may sometimes suit the principal's purpose to endow the agent with larger powers of action than are made known to the third person. Thus, for example, the principal, when he is a purchaser, will perhaps authorize the agent to offer a higher price than he is willing to make known to the seller. On the other hand, it may sometimes be the case that the principal will inform the third person that the agent may do such and such things, which to the agent he says he may not do. Obviously in this case the principal must abide by his statements to the third person.

An illustration of this difference between the instructions to the

1 I use the words "representations" and "instructions" in their largest sense, which includes representation and instruction by conduct as well as by words. It is to be noted in the case of representations that they need not come to the third party directly from the principal. They may come indirectly through the agent. For example, the principal may never see the third person; but if he authorizes the agent to state the scope of the granted powers, he will be bound by such a statement. It not infrequently happens that a statement so authorized may imply a larger power than that contained in the immediate instructions to the agent, in which case the principal will be bound by the statement rather than by the instructions. The principal has in fact empowered his agent to do two things, - to do certain acts, and to make representations as to the authority conferred.

agent and the representations to third persons is presented in a series of cases in which the courts of New York have adopted a rule at variance with the rule of other leading jurisdictions of the common law. A typical case presenting this conflict is that of a shipping agent of a railroad who issues a bill of lading for goods that were not in fact received by the railroad, or of a transfer agent who issues a certificate of stock in a corporation upon a transfer of ownership without taking up the prior certificate, or of the cashier of a bank who certifies a check when there are no funds of the drawer in the bank's possession. The third person in each of these cases is assumed to be an innocent purchaser for value.

In these cases the appointment of the agent to the position of station-master, or of transfer agent, or of cashier, is in itself a representation to all persons having dealings with the corporation through such agents that they are authorized to do all things necessary to the discharge of their official duties. I cannot do better than quote in support of this statement the unanswerable argument of Mr. Justice Davis in the case of New York, New Haven & Hartford Railroad Company v. Schuyler1:

"In truth, the power conferred in these cases is of such a nature that the agent cannot do an act appearing to be within its scope and authority without, as a part of the act itself, representing expressly or by necessary implication that the condition exists upon which he has the right to act. Of necessity the principal knows this fact when he confers the power. He knows that the person he authorizes to act for him, on condition of an extrinsic fact, which in its nature must be peculiarly within the knowledge of that person, cannot execute the power without as res gestæ making the representation that the fact exists. With this knowledge he trusts him to do the act, and consequently to make the representation, which, if true, is of course binding on the principal. But the doctrine claimed is that he reserves the right to repudiate the act if the representation be false. So he does as between himself and the agent, but not as to an innocent third party who is deceived by it."

The difficulty of these cases arises from the undetermined elements of custom of which I have before spoken. Positions like these are very common. They carry with them certain broad, well recognized duties and powers, and those who deal with agents in such positions assume the existence of those duties and powers

1 34 N. Y. 30, 70 (1865).

without special inquiry, and both the principal and the person dealing with these agents, and the agents themselves, may be said to incorporate in their transactions these elements of custom. Consequently, to appoint an agent to one of these positions is in fact to hold him out to the world as having certain powers, although their exercise under certain conditions may constitute a breach of the relation between the agent and the principal. The public are, in fact, informed that the agent may make statements as to the existence of the goods named in the bill of lading, or of the stock purporting to be contained in a stock certificate, or as to the amount on deposit to the credit of a drawer; and yet, as between the agent and the corporation in these cases, it is clearly a breach of duty for the agent to make any representation except in strict accordance with the fact. This is a case, therefore, in which the representation to the third person of the agent's authority may exceed in purview the instructions to the agent.

In the case just considered, the New York Court of Appeals has grasped the situation with a finer sense of justice than the courts of some other jurisdictions. It has embodied its rule in such cases in this phraseology, to quote the language of Judge Finch1:

"It is a settled doctrine of the law of agency in this State that where the principal has clothed his agent with power to do an act upon the existence of some extrinsic fact necessarily and peculiarly within the knowledge of the agent, and of the existence of which the act of executing the power is itself a representation, a third person dealing with such agent in entire good faith, pursuant to the apparent power, may rely upon the representation, and the principal is estopped from denying its truth to his prejudice. A discussion of that doctrine is no longer needed or permissible in this court, since it has survived an inquiry of the most exhaustive character, and an assault remarkable for its persistence and vigor. If there be any exception to the rule within our juris diction it arises in the case of municipal corporations whose structure and functions are sometimes claimed to justify a more restricted liability."

...

The New York rule has not been adopted in the other leading jurisdictions.2 The courts of England, Massachusetts, and the United States Supreme Court have confined themselves to a limited definition of the word "authority," that is, in effect, they

1 Bank of Batavia v. N. Y. &c. R. R. Co., 106 N. Y. 195, 199 (1887).

2 Grant v. Norway, 10 C. B. 665 (1851); Pollard v. Vinton, 105 U. S. 7 (1881); Friedlander v. Texas &c. R. R., 130 U. S. 416 (1889): Mussey v. Eagle Bank, 9 Met. 306 (1845).

define it as the instructions by the principal to the agent, neglecting the fact that the principal may put it out of his power to have recourse to these by reason of his representations to others. If the views herein contended for are correct, it will be seen that the New York rule, while not strictly accurate in its expression, conforms nevertheless more truly than the other to the trilateral character of the relation, and is therefore more consonant with justice.

It is often said that the law of agency depends upon a fiction. Judge Holmes, in the article to which I have previously referred,1 endeavors at great length to establish this proposition. His difficulty is this: while he admits the "plain good sense" of holding the principal responsible for "commanded acts," by which it is clear that he means acts dependent upon direct instructions of the principal to the agent, he cannot understand a responsibility for acts not so commanded. He therefore relegates all such responsibility to a fiction of "identity" between the principal and agent, for which he strives to account historically as a survival of the old doctrines as to the patria potestas, and the merging of individual identity in that of the familia. So far as it works practical justice, he would retain this fiction; but he conceives that it has been carried to excessive lengths in actual decision.

His theory is open to several criticisms. In the first place, it is quite doubtful whether he has successfully established any connection between the doctrines as to patria potestas and our common law. The former are natives of Rome, and it may be questioned whether they were ever domiciled in England. His argument on that point is far from convincing. In the second place, it is the veriest abdication of our reason to base a rule of law on a fiction, trusting it to work practical justice, and to stop there. His obvious duty was to ascertain a theory and standard of practical justice, and then discard the fiction. Without such an extrinsic standard what limit can he put on its operation? In the third place, and this is the fundamental criticism, he fails to recognize that the principal by his representations to others may render himself accountable to them for acts not commanded, or even for acts which, as between himself and his agent, he has forbidden. Such a liability is as plain good sense as that for commanded acts, and will explain many of

1 4 Harv. L. Rev. 345, continued in 5 ibid. 1. See also an article, “Why is a Master liable for the Tort of his Servant?" by Frank W. Hackett, 7 Harv. L. Rev. 107.