It depends upon a consideration of the rights of the public

generally, and of those persons specially who may deal with

tlie agent. If agency is to be admitted as a means of trans-

acting business, it is essential that the business world

should be able to deal with agents, in a reasonable and

prudent manner, without assuming the risk that the agent

may turn out in the end to have exceeded his actual author-

Ity. This consideration leads to the conclusion that where

a principal has vested his agent with apparent authority

to make a certain contract, and the agent, acting within

^ If th(3 principal could not lawfully have made the contract, of course

the agent cannot do so in his behalf. Montreal Assurance Co. v. M'Gil-

livray, 13 Moo. P. C. C. 87.

2 See Chapters II. And V., ante.

CONTRACT FOR DISCLOSED PRINCIPAL. 129

the scope of such apparent authority, does make a contract

with a person who reasonably believes the agent to possess

the authority which he seems to possess, the principal is

bound by such contract, even though the agent's authority

was in fact limited in such a way that the contract was

wholly unauthorized.! The sole inquiry in such a case is

whether there has been a holding out of the agent as one

having authority and whether the third person, acting with

average prudence and good faith, was justified in believing

that the agent possessed the necessary authority .^ If so, the

principal must bear the risk, because he has held out the

agent as possessing the authority which he seems to possess,

and is not in a position to maintain that third parties should

know that what appears to be true is not true. It will be

observed that this conclusion is based upon those doctrines

of estoppel considered in a previous chapter.^

§103. Ostensible authority. — Meaning.

Ostensible or apparent authority vested in an agent may,

when exercised, have the same effect in imposing con-

tractual obligations upon his principal as actual authority.

The doctrine has been clearly and satisfactorily stated in

these words :

" Where a principal has by his voluntary act placed an

agent in such a situation that a person of ordinary prudence,

conversant with business usages and the nature of the par-

ticular business, is justified in presuming that such agent

has authority to perform on behalf of his principal a par-

ticular act, such particular act having been performed, the

principal is estopped, as against such innocent tliird person,

from denying the agent's authority to perform it."*

In order to establish the apparent or ostensible authority

of the agent, therefore, it is necessary to sliow : (1) that the

1 Nickson v. Brohan, 10 Mod. 109 ; Bailer v. Maples, 9 Wall. (U. S.)

766; Johnson v. Hurley, 115 Mo. 513.

2 Spooner v. Browning, 1898, 1 Q. B. 528.

3 Ante, §§ 5, 51, 52.

* Irvine, C, in Johnston v. Milwaukee & Wyoming Investment Co.,

46 Neb. 480, 490. See also Pole v. Leask, 33 L. J. Ch. 162.

9

130 rUINCIPAL AND THIKD I'ARTY.

principal liulil out the agent under circumstances from which

a reasonably prudent man might infer such authority ; (2)

that, acting prudently, and in good faith, X believed the

agent to possess such authority.

(1) Holdinu out. One who holds out another as his agent

cannot deny the agency, or the authority that reasunably

attaches to it, as against one who prudently acts npon such

ostensible authority.^ What constitutes such a "holding

out" as will work an estoppel in favor of innocent j^arties