Friday, November 25, 2011

Agent Fraud or Negligent Misrepresentation

Missouri follows the Restatement (Second) of Agency, Sections 257 and 261, imposing liability on a principal for both agent fraud or negligent misrepresentation.

Sections 257 provides:

"A principal is subject to liability for loss caused to another by the other's reliance upon a tortious representation of a servant or other agent, if the representation is:
(a) authorized
(b) apparently authorized; or
(c) within the power of the agent to make for the principal."
"This precept applies not only where the agent has acted with the intent to mislead but where he failed to exercise reasonable care or competence in making the representation. Restatement (Second) of Torts § 257 comment b."

Mark Twain Plaza Bank v. Lowell H. Listrom & Co., 714 S.W.2d 859, 865 (Mo.App.1986).

Addition Missouri cases applying either or both section 257 or 261 include:

Implied Agency Arising From Acceptance of Agent's Past Conduct

The evidence reveals Listrom had, by its conduct, entered into an implied agency relationship.Stram v. Miller, 663 S.W.2d 269, 270 (Mo.App.1983). The key to implied agency is the principal's acceptance of the agent's past conduct. Id., Lowell Listrom admitted Mr. Azar was authorized to provide information concerning customer accounts to third persons such as the bank. Mr. Azar's testimony also substantiates that fact.
Listrom further argues, however, Mr. Azar was only authorized to release the correct information. "[A] power to make representations involves the possibility of making false and fraudulent ones." Mechem, A Treatise of the Law of Agency, § 1987, p. 1554-5; see also Restatement (Second) of Torts § 257, comment a. The Supreme Court in Tietjens v. General Motors Corporation, 418 S.W.2d 75, 84 (Mo. 1967) put it this way:
"`Tested by reference to the intention of the principal, neither negligence or fraud is within the "scope of the agency;".... The proper inquiry is whether the act was done in the course of the agency and by the virtue of the authority as agent. If it was, then the principal is responsible, whether the act was merely negligent or fraudulent.'"
In view of the above stated proposition, Listrom is bound by the acts of its agent, Aza.