Ilarkness V. W. U. Tel. Co., 73 Iowa, 190, 5 Am. St. Rep. 672; Mil-

liken v. W. U. Tel. Co., 110 N. Y. 403, 1 L. R. A. 281; Powell v.

Wade, 109 Ala. 95, 19 So. Rep. 500, 55 Am. St. Rep. 915, and note;

Kingsley v. Siebrecht, 92 Me. 23, 42 Atl. Rep. 249, 69 Am. St. Rep.

486.

If the agent has a property interest in the contract

equal to its value, or if the contract were really made

with the agent as the contracting party, to the exclusion

of the principal, as where the third person with knowl-

edge of the principal has elected to deal only with the

agent, these cases also would be exceptions.

§ 2G8. What defences open. — In an action by the

principal, the other party may make any defences which

he may have against the principal, and also, usually, any

defence, such as payment or set-off, which he may have

acquired against the agent before the discovery of the

principal, if the principal was not disclosed and the

agent was permitted to appear as the ostensible prin-

cipal.

See Baxter v. Sherman, 73 Minn. 434, 76 N. W. Rep. 211, 72 Am.

St. Rep. 631; Belfield v. National Supply Co., 189 Pa. 189, 42 Atl.

Rep. 131, 69 Am. St. Rep. 799; Rosser v. Darden, 82 Ga. 219, 7 S. E.

Rep. 919, 14 Am. St. Rep. 152; Montagu v. Forwood [1893], 2 Q.

B. 350.

The principal must also, of course, be affected by any

defences growing out of the fraud, misrepresentation

or deceit of the agent in securing the contract.

See Honaker v. Board of Education, 42 W. Va. 170, 24 S. E. Rep.

544, 57 Am. St. Rep. 847, 32 L. R. A. 413.

>: 209. Right to follow and recover money or prop-

erty. — Where property or money belonging to the

principal comes into the hands of the agent for some

particular purpose, use or disposition, such property or

money becomes charged with a trust which can not be

144 Duties of third person to principal. [в§ 269.

defeated except by the act of the principal or the greater

equities of some third person. Any disposition of the

property or money contrary to the purpose for which

the agent received it is unauthorized, and the person

who received it must restore it to the principal unless

he can establish a paramount right. Third persons,

therefore, who by fraud, collusion or sharp practices

obtain such property or money may be compelled to

restore it. And even if the third person has obtained

It in good faith, he must still return it unless he can

show that he is a bona fide holder for value without

notice of the trust.

In the case of ordinary chattels a person, however

free from bad faith he may be or however good a con-

sideration he may give, can obtain no better title than

his grantor had, unless the true owner has done some-

thing which estops him from asserting his title. In the

case of negotiable instruments and money, which is

sometimes said to have no "earmark" by which it may

beMistinguished, one who parts with value in good faith

may be protected.