With this lesson we begins a few lessons in the halachik laws of agency. Some readers will call Phil and/or me to say that a long time ago the laws of agency were already discussed. Right, and Wrong.

There was discussed in lessons 90 and 91 (TT 473 and 474) laws of agents who had a specific role, to collect the debt due to the creditor. That was not a general discussion of the halachot (laws) of agency, but rather dealt with the general topic collection of debts for a creditor, which was part of the topics then being discussed.

The laws of agency are discussed by Rabbi Yosef Karo in Shulhan Aruch Hoshen haMishpat chapters 182 through 188. He calls Chapter 182 "How is one designated as an agent; or if he erred and purchased for a greater price; [and the result of] the agent disobeying the instructions of the principal."

There are generally three parties involved in situations dealing with an agent. There is: (1) the principal who appoints the agent, Whom we shall designate as Levi, (2) the agent, whom we shall designate as Shimon, and (3) the third party, who we shall designate as Reuven, with whom the agent Shimon, deals in the name of the principal. Levi. Agency has been defined as the fiduciary relationship that results from the manifestation of consent by one person (Levi) to another (Shimon) that the other (Shimon) shall act on his, Levi's behalf and subject to his, Levi's control and consent by the other, Shimon, to so act. An agent is a business representative whose function is to bring about, modify, affect, accept performance of, or terminate contractual obligations between the principal and third parties. An agent undertakes to transact some business, or to manage some affair, for another, and to render an account of it.

Agency can be either a disclosed agency or an undisclosed agency. If Reuven knows that Shimon is acting on behalf of Levi, then Shimon is a disclosed agent of a disclosed principal, Levi. If the third party, Reuven knows he is dealing with an agent for a disclosed principal, Levi, there are two possible legal approaches. It may be said that the third party, Reuven, should be careful to ascertain the authority of the agent, Shimon. Or it may be said that the third party, Reuven, can rely on the agent's (Shimon's) power to bind his principal, Levi, since the principal, Levi, has cloaked the agent, Shimon, with apparent authority to act in his behalf. The halachah adopts the first view, and thus the third party, Reuven, should ascertain from the principal, Levi, the scope of the agent's Shimon's authority. The transaction is then one between the principal, Levi, and the third party, Reuven. Failing to take such precaution, it is the third party, Reuven, who has put himself in jeopardy by relying on the agent, Shimon, to tell him the scope of the authority.

If neither the principal, Levi, nor the agent, Shimon, has informed the third party, Reuven, that Reuven when he deals with Shimon, is dealing with an agent, then the third party, Reuven, cannot take any necessary precautions in his dealing with the agent. The results are altogether different than in the case of an undisclosed principal than in the case of a disclosed principal. In the case of the undisclosed principal, the third party, Reuven, has no legal connection with the undisclosed principal, Levi.

There is a general principle of law that actions taken by an agent are the actions taken by the principal.

There is one notable exception. If a person appoints an agent to do an act that is forbidden, then the agent is responsible and not the principal. For example, the principal, Levi, instructs the agent, Shimon, to desecrate the Sabbath. If Shimon then desecrates the Sabbath, it is the agent, Shimon, who is the transgressor and not the principal, Levi. Similarly, if the principal, Levi, tells the agent, Shimon, to rob a bank, it is the agent, Shimon, who is responsible for the act and not the principal, Levi. This holds true even if the principal pays the agent to violate the law. (Here too there are exceptions where the principal is liable to the judgments of Heaven.) There are three exceptions to the general rule of law that a principal is not responsible for the act of the agent if the agent violates the law at the instructions of the principal. (1) The principal, Levi, tells the agent, Shimon, to use an object that Levi is guarding for a third party, Reuven. Levi, the bailee or watchman in this case, is not permitted to use Reuven's object; he is just to guard it (Exodus 22;2). If Levi, the bailee/principal, tells Shimon, his agent, to use the object, both Levi and Shimon are liable should any loss occur to the object. (2) There is a law in the Torah (Exodus 21:37) that states that if a thief sells or slaughters a cow or sheep that he stole, he must pay to the owner a penalty of 400 percent for the cow and 300 percent for the sheep. If Yehudah the thief who stole a cow or sheep tells Dan to sell or slaughter the cow or sheep, then Yehudah will be liable to pay the penalty to the owner of the cow or sheep. (3) There is a law that one may not make use of something belonging to the Holy Temple (Leviticus 5:15). Naftali instructs Issacher to make use of something belonging to the Holy Temple.

Issaacher, pursuant to the instructions of Naftali, makes use of something belonging to the Holy Temple. Naftali andIssacher are both liable for the transgression.

Most applications of the principal-agent relationship in these lessons deal with sales and purchases. The principal, Levi, instructs the agent, Shimon, to sell goods at a certain price and the agent sells for a lower price; or the principal instructs the agent to purchase goods at a certain price and the agent purchases it at a higher price. Or he instructs him to purchase wheat and he purchases barley.

What are the consequences of the agent's acts? Is the principal liable to the third-party seller or buyer? May the principal rescind the sale? Is the agent liable to the principal for the difference in price? What is the relationship between the principal and the agent?

The agent may or may not be an employee of the principal. He may be a private contractor and not an employee.

There are places in these lessons where I have designated the parties as principal and agent, although such legal relationship does not exist. In those situations the principal is the person who gives the instructions and the agent is the person to whom he gives the instructions.

In many communities there are laws and/or local customs that govern laws of principal and agent. Most often the parties will rely on those local laws, customs, and court decisions. There may be lapses in those laws and decisions that permit the parties and/or the Beth Din to follow the halachah. Also there are many persons who prefer to follow the halachah as if the secular laws, customs and decisions of courts do not exist. The parties may elect by which system of laws to be governed. Such decision may be put into their agreements, whether written or oral.

There is a presumption that the agent accomplished the agency. This holds true even if the agent disappears, and even if it is not known if he carried out all of the details of the agency, as long as it is known that he carried out some of the details

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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