Implied Warranty of Authority - The Decision in Collen v Wright

 Collen Vs Wright:

Contracts entered into through an agent, and obligations arising from acts done by the agent may be enforced in the same manner and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person. This effect must follow that the agent must have done the act within the scope of his authority. The authority of an agent and more particularly its scope are subjected to some controversy

Collen Vs Wright (1857), the defendant Wright acted as land agent for principal and leased the principal’s farm to a third party, the plaintiff Collen. Wrights assertion of authority was unqualified but Wright, in fact, acted beyond actual authority because of the length of the lease, and the lease was thereby unenforceable. Wright, the agent was held liable to Collen for damages suffered even though it was an honest mistake by Wright.

The 1857 decision of Collen v Wright is said to have created the doctrine of implied warranty of authority. ' The case was decided when modem principles of the contract were being identified in the context of 19th-century liberalism, while the formulary system of action by writ was coming to an end. In Collen v Wright a land agent and valuer had innocently exceeded his authority when attempting to secure the lease of a farm. It was held that the agent had impliedly promised in the contract that he was authorized to act in that manner (or, on an alternative reinterpretation, to have promised to pay if he was not). The Court of Exchequer Chamber awarded damages for the plaintiff's losses, which resulted from the land agent's assertion of authority (and the principal's refusal to perform).

Facts of the case: 

1. In 1853, Plaintiff, Collen, had the desire to obtain a lease of a farm belonging to WD Gardner.
2. R. Wright, the defendant, was a land agent and had the management of property mentioned up to within a short time before plaintiffs application.
3. Plaintiff believing that Wright had the management of the said property and believing Wright was supposed to be the agent of Gardner applied for lease thereof.
4. An agreement in writing was signed between Collen and Wright as the agent of Gardner.
5. The term of the lease was 12.5 years and the rent was 350 to be paid quarterly with usual exceptions and usual clauses.
6. Plaintiff spent considerable money in cultivation and improvement of the farm believing in the agreement by the testator
7. Gardner, the owner of the land, refused to sign the lease on the ground that testator Wright was not authorized to lease the farm for a period of 12.5 years.
8. Plaintiff, shortly afterwards, believing that the testator Wright was duly authorized by Gardner to sign the said agreement as his agent, and on his behalf, instituted a suit against Gardner for the specific performance of the said contract, and for a decree that Gardner might execute and deliver to plaintiff a lease according to the terms thereof.
9. Gardner defended the suit upon the ground that the testator Wright had no authority from him to sign the said agreements as his agent, the plaintiff.
10. The suit was heard and judgment was pronounced therein that plaintiff's bill should be dismissed without costs, upon the ground that the testator Wright had no authority from Gardner to sign the said agreement as his agent, or on his behalf.
11. Collen commenced an action against Wright to recover the damages sustained by him by reason of Wright not having had the authority to sign the said agreements as the agent.
12. The court opined in favour of the plaintiff and the amount of damages to be received by him was to be ascertained.

Question of Law:

1st. Whether the plaintiff is entitled to maintain an action against the defendants, as executrix and executors of the said Robert Wright, to recover damages.

2nd. Whether, if so, the whole of the damages sustained by the plaintiff, including his costs of the said, can be recovered, or, if some of such damages and costs only can be recovered, which of them, and to what extent, without regard, however, to the exact amount.

Arguments:

For the Principal:

1. The testator Wright was not authorized by Gardner to sign the said agreements as his agent or on his behalf to let the said farm for the period or on the terms specified in the said agreements
2. Plaintiff's bill should be dismissed without costs, upon the ground that the testator Wright had no authority from Gardner to sign the said agreement as his agent, or on his behalf.

For Defendant:

1. Wright, however, bona fide believed, at the time when he signed the said agreements, that he was so authorized
2. The agent cannot indeed be treated exactly as principal in the contract itself.
3. There was no bad motive.

For Plaintiff:

1. The plaintiff has always been willing to perform the said contract on his part and has done all things which it was necessary for him to do in order to entitle him to have the same performed.
2. The testator was liable, although he acted with perfect bona fides; the facts were within his knowledge. There is clearly no remedy against the alleged principal: and it is reasonable that the party making the mistake should answer for the consequences.
3. If the defendant made the representation and it was untrue, the plaintiffs were entitled to recover from him the price of the materials and the costs of the action
4. There can be no doubt that the testator asserted that he had the authority to let the property on the terms to which he agreed. That is a promise and a warranty.
5. If a man describes himself as an agent, when he is not so, he must pay for the damage occasioned by the breach of warranty
6. The case cannot differ from that of a sale of goods by a party alleging himself to be a broker.
7. If a man makes a contract as an agent he does promise that he is what he represents himself to be, and he must answer for any damage which directly results from confidence being given to the representation.

There can be no doubt that in the present case the testator did represent himself to be the agent for William Dunn Gardner: he thought he had Gardner's authority for making the lease, but he had not. He became answerable for the consequences.

Decision:

In the Collen v Wright litigation, the contract that was "lost" was a lease of a farm on Soham Fen in the county of Cambridge. The plaintiff had incurred considerable expenses in preparing the farm for cultivation, as well as in legal costs in a fruitless attempt to enforce the lease agreement in Chancery proceedings. These losses were held to be recoverable. The plaintiff was not, however, awarded the value of the lease, which he had expected to obtain, or the profit he might have expected from it. Following the suggestion of the High Court, the plaintiff abandoned his claim for loss of bargain

damages.

The testator was liable, although he acted with perfect bona fides; the facts were within his knowledge. There is clearly no remedy against the alleged principal: and it is reasonable that the party making the mistake should answer for the consequences.

Conclusion:

The defendant contracted as agent for X to lease to the plaintiff a farm of X's. The defendant had no authority to make such a contract, though he believed he had. Held, he was liable to the plaintiff on a warranty of authority.

The law of breach of the warranty of authority should be read to imply a remedy to an innocent third party, with whom the agent has purported without authority to make a contract or to reach a settlement of outstanding liabilities under a contract, against the agent. If an agent makes a contract beyond the scope of his authority he is himself liable for damage so caused, on a breach of warranty of authority.

An agent who enters into a contract with a third party (for and on behalf of a principal) by implication warrants that he or she has the authority to do so. If this is not the case, the third party has the right to sue the agent for breach of warranty of authority.

References:

1. Upload/FA398636-A18A-4B4A-AD0B-67DF42E894B4.pdf, Manupathra, Available at http://docs.manupatra.in/newsline/articles/Upload/FA398636-A18A-4B4A-AD0B-67DF42E894B4.pdf (Accessed on 8/13/2020)

2. http://www.lexisadvance.com/ (Accessed on 8/13/2020)

3. Law of Agency, Wikipedia. Available at https://en.wikipedia.org/wiki/Law_of_agency (Accessed on 8/13/2020)