We are continuing on in our lessons concerning agents. That is, the principal Levi has appointed Shimon, to be his agent to transact business on Levi's behalf.

Failure to comply with instructions
What if Shimon, the agent fails to do that which Levi instructed him to do on his behalf?

For example, the principal, Levi, gives Shimon $100 and instructs his agent Shimon, to purchase 100 bushels of wheat at $1 a bushel, which is then the price of wheat. The principal informs the agent that the principal wants to buy the wheat because he thinks the price will rise and the principal will make a profit on the price rise. The agent, Shimon, fails to purchase the wheat. Thereafter, the price of wheat rises to a price of $1.50 a bushel, causing a loss of anticipated profits to the principal, Levi, of $50. Is there liability by Shimon to Levi?

There are several possibilities in the halachah regarding the possible liability of the agent:

(1a) The agent, Shimon, is not a paid agent of Levi but rather gratuitously agrees to follow the instructions of Levi, the principal, to buy wheat for Levi, because he, Shimon, is going to the market in all events. Or,

(1b) The agent, Shimon, is paid to work for the principal, Levi, as a worker and Shimon gets paid for the time that he works. But, Shimon was not hired for the specific purpose of buying wheat for the principal, Levi. In both of these instances (1a) and (1b) the agent has no monetary liability to the principal. He may be called to task by the principal for having failed his moral responsibility to the principal.

(2a) Assume, however, that the agent, Shimon, was employed by the principal, Levi, as a purchasing agent to purchase wheat. Or,

(2b) Shimon was a private contractor who contracted to purchase the wheat for the principal, Levi. Shimon failed to purchase the wheat. In both of these instances (2a) and (2b) the agent, Shimon, is liable for the loss of profit incurred by the principal for not having the wheat to sell at a profit.

Resigning the agency
Assume that Shimon, after being appointed as agent by Levi to purchase wheat on Levi's behalf, Shimon wishes to resign his agency and no longer be an agent of Levi? Rather Shimon wishes to purchase the wheat for himself, Shimon. What are the rights of the parties?

(3a) Shimon can so inform Levi, and the agency is terminated. Once the agent notifies the principal, the response of the principal is not relevant since the principal can then communicate with the seller not to sell he wheat to the agent. Even if it is impossible for the principal to notify the seller not to sell to the agent, it does not alter the law. The agent's notification to the principal rescinding the agency prior to performing the act of acquiring the wheat, effectively terminates the agency and the wheat thereafter purchased by Shimon, belongs to the agent, Shimon, the resigned agent.

What if Shimon, the agent does not notify Levi, his principal, that Shimon wishes to terminate the agency? Two criteria have to be present to terminate the agency without Levi's knowledge, so that the wheat that Shimon purchases will belong to Shimon. (i) The agent, Shimon must make such an announcement in the presence of others, that he is buying the wheat for himself, (as long as Shimon makes a statement prior to performing an act of acquisition that he is acquiring the goods on his own behalf, it is an adequate statement); and (ii) Shimon must use his own money. If either one of these two criteria are lacking, Shimon will remain Levi's agent and the wheat purchased by Shimon will belong to Levi. There are several possibilities.

(3b) Assume that the principal Levi gave the agent Shimon $100 and instructed the agent Shimon to purchase 100 bushels of wheat at $1 a bushel. Thereafter, Shimon, not in the presence of the principal Levi, states that he, Shimon, is terminating the agency, and is purchasing the wheat for his own account. Levi is not aware that Shimon seeks to resign as an agent. If the agent Shimon uses the moneys belonging to the principal Levi, the wheat belongs to the principal Levi. Only one criterion was met, the announcement was made. But the second criteria of Shimon using his own money was not met. Thus the wheat belongs to Levi.

(3c) Shimon used his own money to purchase the wheat. But the agent, Shimon, did not make the statement to anyone that he is rescinding the agency and purchasing the goods for himself, the goods belong to the principal, Levi. Since only one criteria was met, namely that Levi used his own money, the wheat belongs to Levi. The second criteria of Shimon making the announcement that he rescinds the agency was not met. If Shimon uses his own money, then the principal Levi owes the agent the money that the agent advanced.

(3d) However, if the money used by Shimon belongs to the agent, Shimon, and the agent, before making the purchase, announces that he is no longer the agent of the principal, Levi, and is purchasing for his own account the wheat will belong to the agent, Shimon.

Assume that when the agent, Shimon, gives the money to the seller, Yehudah, Shimon states that he is acting on behalf of the principal, Levi. As soon as he has made such a statement to the seller, he can no longer rescind the agency even if he uses his own money. (There is also a contrary opinion.)

Thus as stated above, when both criteria are met (i) the agent Shimon announced that he is terminating the agency and (ii) uses his own money to purchase the wheat, the wheat belongs to Shimon. However, Levi can legally proclaim to the members of the community that Shimon is a fraudulent person. There is a difference of opinion among the authorities as to whether the principal can have the agent labeled a fraud only if the principal was specific as to the item to be purchased, such as wheat, but if he was not specific, then the agent cannot be labeled a fraud. Some authorities hold that in any event, whether or not the principal was specific as to what to purchase, the agent can be labeled a fraud. However, if the seller would not sell to the principal but is willing to sell to the agent, the agent may purchase for himself in the first instance and is not labeled a fraud. Similarly, if the agent knows that the seller is an overpowering person and the principal would not enter into negotiations with the seller, but the agent is fearless and purchases for his own account, he is not labeled a fraud.

The agent, Shimon, acting on behalf of the principal Levi purchases wheat from the seller, Yehudah. Yehudah made a mistake in the weight or price and Shimon gained hereby. The agent must make restitution and if he was aware of the mistake made by the seller, the agent must do penance. Assume that the seller cannot be located or died without discoverable heirs. The agent does not share with the principal the erroneously obtained merchandise or the lesser price paid. If the mistake was not discovered until the goods arrived to the principal, the entire ill-gotten gain belongs only to the principal. The agent must make restitution and do penance as does any robber. We are here concerned only with the relationship between the principal and agent.

The subject matter of this lesson is more fully presented in Volume VI Chapter 182 of"A Restatement of Rabbinic Civil Law" by E. Quint, published by Jason Aronson, Inc. and on sale at local Judaica bookstores.
Questions to quint@inter.net.il

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