SOUTHERN LAW REVIEW

VOL. VII., N. S.] ST. LOUIS, April, 1881.

[NUMBER I.

THE POWER OF USAGE AND CUSTOM TO CONTROL OR ALTER RULES OF LAW.

II.

In a former paper,' the power of usage and custom to affect legal rules and liability was considered in three cases,

I. In the Case of Common Carriers.

II. In the Law of Insurance.

III. In the Relation of Landlord and Tenant.

In this paper, the discussion there commenced will be extended to the following, viz. :—

IV. In the Relation of Principal and Agent.

V. In the Law of Corporations.

VI. In the Law of Sales.

VII. In the Law of Banks and Banking, and Negotiable and Assignable Paper.

The attention of the reader is directed to the language of courts and judges to the effect that a custom or usage which is contrary to an "established rule of law" is never admissible in evidence for the purpose of varying or altering those rules, which was cited at some length in the former paper, and which it is not necessary to repeat. But it may be well to repeat in this place the three divisions into which, as appears to the writer, these "established rules of law," and the cases in which usage and custom have been set 2 Id. 845, 846.

16 South. L. Rev. 845.

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up to affect them, properly resolve themselves. They are: First, those in which usage has been so powerful as not only to obtain recognition where proved, but to entirely alter the legal doctrine, and to become itself the "established rule of law" for subsequent cases; second, those in which the old rule of law still prevails, except where it appears that the usage of the parties has been different, and evidence of such a contrary custom is admissible to control the effect of the legal doctrine; and, third, those in which usage or custom is not permitted to affect the legal doctrine. Bearing these in mind, we will proceed to a consideration of the different relations in which usage has been controlling or ineffectual, as the case may be.

IV. In the Relation of Principal and Agent.

As already stated,' not every one of the many legal rules governing the rights and liabilities of principal and agent can be discussed, in connection with our subject, within our limited space. It will be sufficient for the purpose of this essay to note only the principal rules as to which a contrary custom has grown up among the parties; and in the law of agency these are eleven, as follows:

(1.) An authority to do an act cannot be delegated to another - Delegata potestas non potest delegari. (2.) A factor has no implied authority to sell except for cash. (3.) A factor has no implied authority to pledge the goods of his principal as security for his own debt. (4.) A payment to an authorized agent will discharge the debt, but (5) an agent employed to sell for a known principal has no implied authority to receive payment. (6.) A factor has no implied authority to set off his own private debt against the debt of the vendee. (7.) Profits made by an agent out of the principal's business belong to the principal. (8.) An agent of the owner to sell property cannot be also an agent for the purchaser as well, and receive compensation from both. (9.) An agent cannot legally disregard his principal's instruc

16 South. L. Rev. 849.

tions. (10.) An agent, contracting as such, is not personally liable on a contract so made. (11.) An agent contracting in his own name will be personally liable on his contract. These rules will be discussed in the above order.

(1.) Delegata potestas non potest delegari. This maxim expresses an important principle in the law of agency. This principle may be thus stated: One who has authority from another to do an act must execute it himself, and cannot delegate his authority to another; for, being a confidence or trust reposed in him personally, it cannot be assigned to a stranger, whose ability and integrity might not be known. to the principal, or, if known, might not be selected by him for such a purpose. Although to this general rule there are some exceptions, they are not material to this discussion, as it is important here to note only that usage may change a case which otherwise would be governed by the maxim as first stated in this paragraph. In one case it was remarked by Lord Eldon that "the doctrine is very dangerous indeed, that if an auctioneer is authorized to sell, all his clerks when he goes out of town are, in consequence of any usage in that business, agents for the person who authorized them," 3 but in Moon v. Guardians of the Poor,+ a custom, in the case of an architect, to employ a surveyor to make out the quantities of a building proposed to be erected, was held valid so as to render the employers of the builder liable to the surveyor for his work. "The jury found," said Tindal, C. J., "that there was a usage in the trade for architects or builders to have their quantities made out by surveyors. * * It appeared that the custom is

*

1 Johnson v. Cunningham, I Ala. 249; Alexander v. Alexander, 2 Ves. 640; Burial Board v. Thompson, L. R. 6 C. P. 457; Baker v. Cave, 1 Hurl. & N. 678; Warner v. Martin, 11 How. 209: Hawley v. James, 5 Paige, 326; Locke's Appeal, 72 Pa. St. 491; Lyon v. Jerome, 26 Wend. 485; Ex parte Winsor, 3 Story, 411: Bocock v. Pavey, Ohio St. 270.

2 See Howard v. Bailee, 2 H. Black. 618; Quebec, etc., R. Co. v. Quinn, 12 Moo. P. C. C. 265; Howard's Case, L. R. 1 Ch. 561; Bodine v. Insurance Co., 51 N. Y. 117; Buckland v. Conway, 16 Mass. 396; Commercial Bank v. Norton, 1 Hill, 501.

3 Coles v. Trecothick, 9 Ves. 250.

43 Bing. N. C. 814.

beneficial to the parties concerned; that if builders are not assisted by surveyors, they send in tenders which lead to loss and inconvenience from a mistake in the quantities." Bosanquet, J., said: "The jury must be taken to have found that what has been done was done consistently with the usage of the trade. It has been contended that architects are employed only to draw plans, and not to make out quantities; but the defendants knew that the quantities were to be made out by somebody, and that, if the work proceeded, the surveyor was to be paid by the successful competitor; and the jury have said that the architect, in employing a surveyor, acted according to the usage of the trade." Similarly, in Gray v. Murray,' Chancellor Kent allowed a supercargo to recover for services performed by subordinates appointed by him on account of his sickness, the decision being expressly placed on the usage of the trade in such cases. In a subsequent Alabama case, the court, while deciding, on the facts in the case, that the delegation was unauthorized and not binding, admitted that the custom of the trade might, if proved, have changed the result;2 and this rule, therefore, belongs to our second division.

(2.) It was laid down by Lord Chief Justice Holt, in Rex v. Lee,3 decided in 1701, that "every factor, of common right, is to sell for ready money." Mr. Wharton states it as the general rule of law that a factor must sell for cash;^ and Chancellor Kent has expressed himself to this effect most unequivocally. It is, perhaps, more correct to say, with Story, that the right of a factor to sell upon credit, although formerly a fact to be ascertained by usage, is now treated as an undeniable principle of law, and incidental to the agency in the absence of all contradictory proofs. In Goodenow v.

1 3 Johns. Ch. 167.

3 12 Modern, 514.

5 2 Kent's Comm. 622.

2 Johnson v. Cunningham, r Ala. 249.

4 Whart. on Ag., sect. 740.

6

Story on Ag., sect. 209.

7 Goodenow v. Tyler, 7 Mass. 36; 5 Am. Dec. 22; Alen v. Vanderpool, 6 Johns. 69; 5 Am. Dec. 160; Forestier v. Boardman, 1 Story, 43; Emery v. Gerbier, 2 Wash. C. Ct. 413; James v. McCredie, 1 Bay, 297; Burrill v. Phillips, Gall. 360; Greely v. Bartlett, 1 Greenl. 172; Houghton v. Matthews, 3 Bos. & Pul. 489; Leverick v. Meigs, 1 Cow. 645; Leach v. Beardslee, 22 Conn. 404.

Tyler,' a custom in Boston, where the sale was effected, for factors to sell on credit at the risk of their principals unless an additional premium was allowed for taking the risk upon themselves, was recognized, and one who, having goods consigned to him, sold on three months' credit, taking in payment the purchaser's promissory note to himself, and the purchaser afterwards became insolvent, was held not liable for the value of the goods. This rule therefore falls within our first division.

(3.) A factor has no authority to pledge the goods of his principal as security for his own debt. "Though a factor," says Kent, "may sell and bind his principal, he cannot pledge the goods as security for his own debt. The principal may recover the goods of the pawnee, and his ignorance that the factor held the goods in the character of an agent is no excuse."3 Many authorities support this principle, and in the absence of a contrary statute no rule of the common law seems to be better settled. But Judge Story, after unqualifiedly laying down the rule as before stated, adds. that they may pledge the goods of a principal for all charges and purposes "which are allowed or justified by the usages of trade." And Mr. Wharton says: "Yet, even while professing to accept this principle (ie., that the factor cannot pledge), the courts, feeling its inconvenience, were ready to modify it by compelling it to yield to local usage." There are cases in the books in accordance with these views, but they are few. Lord Eldon, in Pultney v. Keymer,' was apparently inclined to this mode of avoiding the strictness of the common-law rule, but Pultney v. Keymer has since

5

I 7 Mass. 36; 5 Am. Dec. 22.

6

2 And see Chandler v. Hogle, 58 Ill. 46; Rich v. Munroe, 14 Barb. 602; Johnston v. Usbourne, 11 Ad. & E. 549.

32 Kent's Comm. 626.

4 See Story on Ag., sect. 113; Paterson v. Tash, Stra. 1178; McCombie v. Davies, 6 East, 538; Evans v. Potter, 2 Gall. 13; Van Amringe v. Peabody, I Mason, 440; Michigan State Bank v. Gardner, 15 Gray, 362; Mackay v. Dillinger, 73 Pa. St. 85; Kinder v. Shaw, 2 Mass. 398; Bowie v. Napier, I McCord, 1.

5 Story on Ag., sect. 113. 6 Whart. on Ag., sect. 752. 7 3 Esp. 182.