Sunday, September 9, 2012

Learning Agency Law from the Digital Commons

Erich C. Stern, A Problem in the Law of Agency, 4 Marq. L. Rev. 6 (1919) is an excellent starting point for lawyers confronted with secret instructions by which a principal seeks to disclaim authority which it is known that the agent is exercising.

Stern believed:

Liability in both cases should frankly be rested, not upon false
appearances as to the extent of the agent's authority, but upon
the general proposition that when a man appoints an agent to
make a certain class of contracts, the law will not allow him to
limit that authority so as to exclude any of the reasonably necessary,
convenient, or customary ways of executing that authority.
The consequence would be to render it immaterial whether the
third party knows of any attempted limitations upon the authority
or not. The law would then be expressed by changing the above
quotation from Justice Holmes to read as follows: "It is true
that in determining how far authority extends, the question is of
ostensible authority. This illustrates the general rule which governs
a man's responsibility for his acts throughout the law. If
the principal knowingly employs the agent to exercise a certain
power, he ipso facto gives the agent all- those powers which, in
the majority of the same or similar cases, are usually connected
with the power expressly given."

Saturday, August 25, 2012

Missouri courts may determine whether and non-compete agreement is reasonable and modify the agreement in accord with intent of the parties, when an agreement is found to be unreasonable


A factor in Missouri's lagging economic performance and low wages is that it tends to enforce overly broad non-compete agreements. Regional Disadvantage? Non-Compete Agreements and Brain DrainGive Me Equity or Give Me Death - The Role of Competition and Compensation in Building Silicon Valley

This direction may have been reversed in Whelan

Whelan Security's business model of providing security guard services nationwide  is to vigorously enforce such agreements so as to preclude competition. 

In this case a Whelan employee who worked in Dallas, Texas, and a Whelan employee who worked in Nashville, Tennessee, started a security business in Houston, Texas. Whelan filed suite when the former employees solicited a Whelan customer in Houston, Texas.

Monday, July 23, 2012

The importance of acquiensce and practice

Eisenstein, Lois Peel (1980) "CPLR 311(1): Secretary's Practice of Accepting Process Deemed Authorization by Appointment of Agent for Service Upon Corporation," St. John's Law Review: Vol. 54: Iss. 2, Article 6.
Available at:

Saturday, June 23, 2012

MAI Civil ---new edition

has been published and has changes applicable to Agency submissions

Friday, May 4, 2012

Disclaiming the agent's implied warranty of workmanlike services

On June 12, 2012 the Eastern District will hear oral argument in Abengoa Bioenergy U.S. Holding, Inc. v. Chicago Title Insurance Company, ED97555, which presents an important question about a disclaimer of the implied in fact warranty of workmanlike service and any stricter assumed in fact duties by a service provider.

Chicago Title is seeking to reverse a $48 million dollar jury verdict for damages arising from a improperly prepared letter report. Chicago Title relies on a disclaimer limiting damages to $800.00 that accompanied its invoice for its flawed services.

Abengoa asks a simple question. In a service contract, entered into on the basis of anterior warranties, is an attempt to disclaim effective?  We know the answer is “No” in contracts for the sale of goods:

Where, as in the case at bar, sales transactions are entered into on the basis of anterior warranties, it is universally held that an attempt to disclaim the binding effect of such warranties upon or after delivery of the goods, by means of language on an invoice, receipt or similar notice, is ineffectual unless the buyer assents or he is charged with knowledge of nonwarranty as to the transactions. (Keller v. Flynn, 346 Ill. App. 499 [105 N.E.2d 532, 535]; Diepeveen v. Larry Vogt, Inc., supra; Manglesdorf Seed Co. v. Busby, 118 Okla. 255 [247 P. 410, 411]; Moorhead v. Minneapolis Seed Co., 139 Minn. 117 [165 N.W. 484, 485, Ann.Cas. 1918E 481, L.R.A. 1918C 391]; Ward v. Valker, 44 N.D. 598 [176 N.W. 129, 131]; Longino v. Thompson, (Tex.Civ.App.) 209 S.W. 202, 205; Ingraham v. Associated Oil Co., 166 Wash. 305 [6 P.2d 645]; Edgar v. Joseph Breck & Sons Corp., 172 Mass. 581 [52 N.E. 1083]; Reliance Varnish Co. v. Mullins Lbr. Co., 213 S.C. 84 [48 S.E.2d 653, 659]; Gray v. Gurney Seed & Nursery Co., 62 S.D. 97 [252 N.W. 3, 6]; Davis v. Ferguson Seed Farms, (Tex.Civ.App.) 255 S.W. 655, 662.) In each of the last cited cases the courts were confronted 609*609 with the question of whether the existence of an alleged warranty was extinguished by nonwarranty statements or disclaimers of warranty printed on letters, invoices, or other literature sent with or after the shipment of goods. In each case it was held that where goods are sold subject to a warranty, the purchaser is entitled to rely upon this warranty despite the printed statements on the seller's invoices, at least until he has actual knowledge of the disclaimer, or because of the facts and circumstances surrounding the transaction he should be charged with such knowledge. The following language from Ward v. Valker, 44 N.D. 598 [176 N.W. 129, 131], epitomizes the prevailing view: "If the circumstances anterior to the invoices indicated the existence of a warranty, we cannot say the printed statement (of disclaimer) on the invoice operated to extinguish it as a matter of law." The rule is also succinctly expressed in Gray v. Gurney Seed & Nursery Co., supra, that "when the seller expressly warrants the goods, the purchaser is entitled to rely upon this warranty at least until he has actual knowledge of the disclaimer or because of the facts and circumstances surrounding the transaction should be charged with such knowledge." The evidence fully demonstrates that the sales were made pursuant to express warranties and that United had no knowledge of the disclaimer and limitation statements.

India Paint and Lacquer Co. v. United Steel Prod. Corp., 267 P. 2d 408 - Cal: Court of Appeal, 2nd Appellate Dist., 2nd Div. 1954

Why should the result be any different in a contract for the sale of services?

Missouri seems to have already ruled against Chicago Title. The case, Belt Seed Co. v. Mitchelhill Seed, Co., 153 S.W.2d 106 (Mo. App. 1941), discusses the Moorhead case from Minnesota but is not mentioned by any of parties, leaving the heavy lifting in this case to the clerks for the court of appeals.

Further Discussion.

In Missouri, all service providers, including every agent, make several express warranties, implied from facts and circumstances, including an express implied in fact warranty to perform the service in a workmanlike manner.  "The performer of services has a duty to perform in a workmanlike manner and to exercise reasonable skill." See generally (1956) "Extension of Warranty Concept to Service-Sales Contracts,"Indiana Law Journal: Vol. 31: Iss. 3, Article 3.Available at:; Timothy Davis, The Elusive Warranty of Workmanlike Performance, 72 Neb. L. Rev. 981 (1993). (good collection of cases and authorities) (Davis mistakenly views the warranty as a "gap filler," failing to consider the stricter duties arising from facts and circumstances, such as the warranties for a specific result in found in the Missouri cases of McCallum and Bowling, discussed below).

Further, a service provider has a duty to exercise reasonable care. As to the distinction between reasonable skill and reasonable care see Prosser, Torts § 32, at 161 n. 31 (4th ed. 1971).

A part of this duty includes the "duty of the affirmative action which would be taken by a reasonable man in their position" to discover information, a duty to find out. Prosser, Torts § 32, at 160 (4th ed. 1971).

Express warranties implied in fact from the facts and circumstances of the sale. These warranties are implied in fact warranties. Cases and commentators frequently confuse implied in fact and implied in law warranties. Disregard this confusion. The warranty to preform a service in a workmanlike manner with reasonable skill and care, for example, is an implied in fact warranty arising from the facts and circumstances of the hiring and is a positive warranty. A warranty is positive affirmation of fact by the seller made to induce a buyer to make a purchase and constitutes an express warranty. Charles F. Curry & Co. v. Hedrick, 378 S.W.2d 522 (Mo.1964); Turner v. Central Hardware Co., 353 Mo. 1182, 186 S.W.2d 603 (1945). Positive affirmations arise from conduct. Banks, for example, warrant and represent they are solvent by accepting deposits.

Because the warranty is implied from facts, it can be changed or modified by express agreement, in either of two ways.

First, an additional express implied in fact warranty of a specific result arises "when a specific result can reasonably be expected and is a basis of the bargain." (1956) "Extension of Warranty Concept to Service-Sales Contracts,"Indiana Law Journal: Vol. 31: Iss. 3, Article 3.Available at:

Thus, in McCallum v. Executive Aircraft Co., 291 S.W.2d 650, 657 (Mo.App. 1956) , the express implied warranty to repair a propellar for private aircraft in a workmanlike manner was modified by the facts and circumstances to be an express implied in fact "warranty that the propeller was safe and airworthy."

Or, if a dentist contracts to fabricate a denture for a patient, a denture is contemplated which fits the patient's mouth and serves the normal purposes of eating and talking. Samuels v. Davis, [1943] 1 K.B. 526 discussed here.

A good further discussion of the English cases can be found here. The English view is that there is a "stricter duty" … "implied as matter of fact based on the actual intention of the parties as distinct from being implied by law based on the presumed intention of the parties."

Missouri has long held this view. Kennedy v. Bowling, 319 Mo. 401, 4 S.W.2d 438 (banc 1928) (holding that a design-builder of a warehouse impliedly warranted that the warehouse was sufficiently suited for the purposes intended).

Second, if there is an express warranty as to the duty of skill and care, it trumps the implied in fact express warranty. Korte Constr. Co. v. Deaconess Manor Ass'n, 927 S.W.2d 395, 405 (Mo.App. E.D.1996) (stating that "where the contract contains an express provision governing the degree of skill and competence with which the work will be performed" such express provision controls).

Parol Evidence and disclaimer of warranties. The parole evidence rule and the disclaimer of warranties is discussed in Parole Evidence Rule In Warranties of Sales of Goods- Contractual Disclaimers , 7 Fordham L. Rev. 238 (1938),

Update: The Court of Appeals, Eastern District, has affirmed without opinion.