Is held that the master is liable for every wrong committed

by the servant in the course of the employment and for the

master's benefit.^ And it is immaterial whether the master

authorized or directed the act ; the first inquiry is whether it

was within the course of the employment, and a secondary

Inquiry may be whether it was for the master's benefit.

" This rule is obviously founded on the great principle of

social duty, that every man in the management of his own

affairs, whether by himself or by his agents or servants, shall

so conduct them as not to injure another; and if he does not,

and another thereby sustains damage, he shall answer for

it," '^ that is, he ahall answer for it under those circumstances

where the injury, if committed in person, would constitute a

breach of legal duty.

1 For a discussion of the meaning and definition of " tort," see Bigelow

on Torts (7th ed.), PP- 1-30.

2 Pollock on Torts (.5th ed.), p- "*- et seq. ; Bigelow on Torts (7th ed.),

§§ 79-S2.

В» Fai-well V. Boston, &c. R., 4 Mete. (Mass.) 19.

13

194 Principal and third partv.

Contract is the chief subject-matter of tlie law of principal

and agent because an agent is employed mainly to influence

third persons to enter into new legal relations with the prin-

cipal. Ihit an agent may have authority, real or ostensible,

to make representations to third j)ersons which when acted

upon involve the [iriucipal in a tort liability. Accordingly we

have to discuss here such torts as may be committed by an

agent as agent, namely, torts arising from representations

made by the agent to a third person in order to induce him to

act. These torts differ from those committed by a servant

In this, that a servant injures a person by acting upon him or

his property, while an agent injures a person by induciug the

Injured person to act to his own prejudice ; and this the

agent does by making representations calculated to influence

the conduct of the injured person.

В§ 149. Basis of masters and of principal's liability for tort.

A master's liai)ility for the torts of his sei-vant rests upon

no well-defined legal princijdcs. It is clear that what he

commands he should be answeral)le for. It is now settled

that he may ratify a tort and become answerable therefor,

although a learned judge has recently said, — "If we were

contriving a new code to-day, we might hesitate to say that a

man could make himself a party to a bare tort, in any case,

merely by assenting to it after it had been committed."^

But as to why he is liable for a tort which he neither com-

manded nor ratified, it is difficult to explain. The whole

matter must be referred to grounds of social utility. A

master is answerable because the servant is about the mas-

ter's business, and it is, on the whole, better that the master

should suffer for defaults in the conduct of the business, than

that innocent third persons should bear the losses that such

defaults cast upon them.^ Whatever the reason, the rule is

established that the master is lialde for all torts committed

by his servant in the course of the employment and for the

^ Mr. Justice Holmes in Dempsey v. Chambers, 154 Mass. 330.

a See rollock on Torts (5th ed.) pp. 72-74.

TOUTS AND FRAUDS OF AGENT. 195

master's benefit, and in some cases even when tlie tort was

committed for the agent's own purposes.^

Many cases dealing with the liability of a principal for an

agent's torts, and even for misrepresentations not amounting

to tort, have sought to apply the same rule as in the case of

master and servant.^ But when it is remembered that an

agent commits a tort only by making a representation, it will

be perceived that the liability of the principal may be made to

rest upon grounds more solid, or at least more certain, than

those sustaining the liability of a master for a servant's torts.

Wo need only inquire (1) did the principal hold the agent

out as having authority to make the representation, and (2)

where the third person has been induced to act to his own

prejudice, did the third person act relying reasonably upon

the ostensible authority of the agent and the representations

which he made ? In other words we may solve the problem

of the liability of the principal for his agent's representations

upon the same reasoning as that employed in solving the

problem of the liability of the principal for the contracts of

his agent.'' A principal is responsible for every such repre-

sentation of his agent as is made within the scope of the

authority, that is, as he leads third persons reasonably to

believe that the agent possesses the authority to make.*

The liability of a principal for his agent's torts is therefore

referred to the doctrine of estoppel. It is the " scope of the

authority " and not the " course of the employment " that is

the test. An agent may have real or ostensible authority to

make representations. A servant may have real, but cannot

have ostensible, authority to commit torts. The doctrine of

1 See this more fully discussed in Book IT. under the head of " Master

and Servant ; " post, В§ 242 et seq.

2 Udell V. Atherton, 7 II. & N. 172 ; Barwick v. English Joint Stock

Co., L. R. 2 Ex. 259; British iNIutual Banking Co. v. Charnwood Forest

Ry. Co., 18 Q. B. D. 714; Friedlander v. Texas, &c. Ry., 130 U. S. 410;

Griswold v. Haven, 25 N. Y. 595, 600; ante, В§ 52 a.

8 Ante, §§ 102-103, 106.

* New York & N. II. R. i\ Schuyler, 34 X. Y. 30 ; Armour v. :Mich.

Cent. R., 65 X. Y. Ill ; Bank of Batavia v. New York, &c. R.. 106 N. Y.

195; Fifth Ave. Bank v. Forty-Second St., &c. Co., 137 N. Y. 231.

196 PRINCIPAL AND THIRD PARTY.

estoppel is sunicieiit to dctenninc the liability of a principal

for an agent's torts ; it can have no ap})lication to the liabil-

ity of a master for a servant's torts.

There are cases in which the master may be estopped to

deny tliat tlie wrong-doer is his servant, as where he re-

presents that he is practising a profession and thereby induces

third persons to be operated upon by one held out as his

skilled assistant.^ But this is estoppel to deny the existence

of the relation merely. The liability for a tort committed by

such ostensible servant is fixed by the ordinary rule applicable

to master and servant. Estoppel to deny the existence of

the relation could not be invoked where the third person is

not thereby induced to change his legal relations or position.^

В§ 150. Nature of third persons remedies.

The person injured by a misrepresentation upon which he

relies to his damage may proceed in tort for deceit where the

misrepresentation was made with knowledge of its falsity or

with a reckless disregard of its truth or falsity. If, however,

the misrepresentation was made innocently, that is, with a

belief in its truth, no action in tort will lie.^

Misrepresentation may, however, give the injured party a

right to rescind a contract^ or it may work an estoppel.^ In

equity there is also a right of restitution which is very

similar to the common law action for damages.^ Misre-

prcs(Mitation is also a defence to an action for specific per-

formance in equity.

In the sections which follow, we shall first consider the

effect of misrepresentation by an agent in giving rise to an

action in tort for deceit, and shall then consider other aspects

1 Ilamion v. Siegel-Cooper Co., 167 X. Y. 24-4.

2 Smith ;-. Bailey, 1891, 2 Q. B. 40.'3.

8 Bigelow on Tort (7th ed.), §§ 1:39-141; Derry v. Peek, 1-1 App. Cas.

337.

* Ke<lirrave v. Hard, 20 Ch. Div. 1.

6 lluft'cut's Anson on Cont. pp. 199-203; Ewart on Estoppel, pp. 222-

237.

Ewart on Estoppel, pp. 222, 225.

TORTS AND FKAUDS OF AGENT. 197

of the question whether tlic particular remedy sought be in

tort, in contract, or by way of estoppel.

2. Liahilif y for Frauds and Misrepresentations of Agent.

В§ 151. Fraud and misrepresentation generally.

Fraud is a term in the law of rather vague meaning. It is

often used to include: (1) misrepresentations which amount

to deceit and are remediable in an action for damages ; (2) mis-

representations whicli, whether amounting to deceit or not,

are either made terms in contracts or constitute inducements

to entering into contracts.^ Strictly the term fraud might well

be confined to misrepresentations which constitute actionable

deceit, while the term misrepresentation might be used to

designate those cases where there could be no action for deceit,

but the misrepresentation is either a term in the contract or

an inducement to entering into it. Fraud then might have

these results : first, it might give rise to an action for deceit ;

second, it might vitiate a contract; third, it might work an

estoppel. Misrepresentation might vitiate a contract or work

an estoppel, but it could not give rise to an action for deceit.

Two main problems confront us in discussing the liability

of a principal for the frauds of his agent: (1) is a personally