ROBINSON v. MOLETT
(1875) LR 7 HL 802, 44 LJCP 362, 33 LT 544
Court: HOUSE OF LORDS
Judgment Date: 06/07/1875
Catchwords and Digest
AGENCY - AUTHORITY OF THE AGENT - IMPLIED AUTHORITY - TO ACT ACCORDING TO CUSTOM OR ACCORDING TO ORDINARY COURSE OF BUSINESS - INTRINSIC CHARACTER OF ACTUAL AUTHORITY MUST NOT BE CHANGED
AGENCY - RELATIONS BETWEEN PRINCIPAL AND AGENT - DUTIES OF AGENTS TO PRINCIPALS - GENERAL DUTIES - OTHER CASES OF AGENT'S BREACH OF DUTY - WHERE AGENT SELLS HIS OWN PROPERTY TO PRINCIPAL - AGENT CANNOT SELL HIS OWN PROPERTY — NOTWITHSTANDING ANY USAGE TO THE CONTRARY
CUSTOM AND USAGE - USAGE - SCOPE, EFFECT AND EXTINGUISHMENT OF USAGES - EFFECT OF USAGE UPON CONTRACTS - MAY CONTROL CONTRACT—CANNOT CHANGE INTRINSIC CHARACTER
CUSTOM AND USAGE - USAGE - SCOPE, EFFECT AND EXTINGUISHMENT OF USAGES - IN GENERAL - DEFINED—GENERAL AND PREVAILING COURSE OF BUSINESS
A person who employs a broker to transact business for him in a market with the usages of which the principal is unacquainted gives him authority to contract upon the footing of such usages, provided that they are only such as relate to the mode of performing the contract, and do not change its intrinsic character. A custom in a particular market that a broker who has purchased, and is purchasing, goods of a particular kind, in his own name, may take portions of those goods and supply them to principals who have employed him in his character of broker to buy such goods for them, is one of a peculiar nature, and cannot be supported as against a principal not proved to have been acquainted with it when he gave his order.
R, a merchant in Liverpool, gave orders to a tallow broker in London to buy certain quantities of tallow for him. The broker did not buy the specified quantities from any person, though he sent bought-notes in the usual form, ‘Bought of A on your account’: both before and after the order he bought from various persons, in his own name, larger quantities of tallow, proposing to allot to R the quantities R had desired to be bought. On R's refusal to accept, the broker sold the tallow, and brought an action for the differences: Held though the evidence showed such a mode of dealing to be the usage in the London tallow market, the action was not maintainable against a principal who did not appear to have had knowledge of its existence.
A custom in a particular market that a broker who has purchased, and is purchasing, goods of a particular kind, in his own name, may take portions of those goods and supply them to principals who have employed him in his character of broker to buy such goods for them, is one of a peculiar nature, and cannot be supported as against a principal not proved to have been acquainted with it when he gave his order.
Although a person who as principal employs a broker to transact business for him in a particular market is bound by the usage of that market, though unknown to him, provided the usage is one that merely regulates the mode of performing the contract and does not change the intrinsic character of the contract, yet where the usage is one which gives the broker an interest at variance with his duty, as by converting him into a principal instead of a mere agent to establish privity of contract between two principals, such a usage is not binding on a principal who, being ignorant of the usage, employs a broker to whom the usage is known to perform the ordinary and accustomed duties belonging to the office or employment of a broker. The principal is not bound to inquire what the usage may be, or whether there be any particular usage affecting the market in which he proposes to deal.
Appellant, a Liverpool merchant, employed respondents, brokers of London, to buy tallow for him in the London tallow market. They having other orders bought in their own name a quantity sufficient to cover all their orders, and by letter informed appellant that they had bought on his account so many tons, but did not mention the name of the seller. A few days after they sent him notice that they were already to deliver to him so many casks of tallow in fulfilment or part fulfilment of his order, but did not allude to any third party as the seller. Appellant acknowledged the receipt of these notices without observation. There was a usage on the London tallow market for brokers when they received orders to contract in their own names, and if their principals refused to accept or deliver, to buy or sell against them, and charge them with the loss. Appellant was ignorant of this usage. On becoming aware of it, and of the mode in which his order had been executed, tallow: having in the meantime fallen, he refused to take the tallow: Held (1) as respondents were employed to act as brokers only, the usage which converted them into principals was inconsistent with the employment, and as appellant was ignorant of it when he gave his orders, he was not bound by the usage; (2) as the first notice sent by the brokers was that they had bought on appellant's account, he was not thereby put on inquiry as to the usage or as to the name of the seller; (3) he was not bound to accept when it turned out that his own brokers might in fact be the vendors, or to pay them the difference between the price at which they bought and that at which they sold in consequence of his having refused the contract.
Although a usage may control the mode of performing a contract, it cannot change its intrinsic character.
A custom in a particular market that a broker who has purchased, and is purchasing, goods of a particular kind, in his own name, may take portions of those goods and supply them to principals who have employed him in his character of broker to buy such goods for them, is one of a peculiar nature, and cannot be supported as against a principal not proved to have been acquainted with it when he gave his order.
R, a merchant in Liverpool, gave orders to a tallow broker in London to buy certain quantities of tallow for him. The broker did not buy the specified quantities from any person, though he sent bought notes in the usual form: ‘‘Bought of A on your account,’’ but, before and after the order, he bought from various persons, in his own name, larger quantities of tallow, proposing to allot to R the quantities R had desired to be bought. On R’s refusal to accept, the broker sold the tallow, and brought an action for the differences: Held though the evidence showed such a mode of dealing to be the usage in the London tallow market, the action was not maintainable against a principal who did not appear to have had knowledge of its existence.
Customs of trade, as distinguished from other customs, are generally courses of business invented or relied upon in order to modify or evade some application which has been laid down by the courts, of some rule of law to business, and which application has seemed irksome to some merchants; and when some such course of business is proved to exist in fact, and the binding effect of it is disputed, the question of law seems to be, whether it is in accordance with fundamental principles of right and wrong. A stranger to a locality or trade, or market, is not held to be bound by the custom of such locality, trade, or market, because he knows the custom, but because he has elected to enter into transactions in a locality, trade, or market wherein all who are not strangers do know and act upon such custom. The question, therefore, I submit, in the present case is, whether the alleged custom is not too much in favour of the brokers who set it up, whether it does not pass beyond due freedom and degenerate into injustice. If the custom which exists in fact is not unjust, as against principals ignorant of it, your Lordships will uphold it, however much it departs from the rules hitherto recognised by the courts as applicable to the contract of employment between principals and brokers, but if it so far breaks from those rules as to be unjust to such principals in such contract, your Lordships will pronounce it to be void as a custom (Brett J).