Politziner v. Vanech

The finding discloses a written contract entered into between the plaintiffs, as sellers, and the defendant, as buyer, for the sale and purchase of one hundred tons of white Java sugar. The defendant claims that there was an implied warranty attached to the original contract of sale to the effect that the white Java sugar contracted for was reasonably fit for the particular purposes for which the goods were required, which purposes were made known to the seller by the buyer who relied on the seller's skill and judgment. The Sales Act, General Statutes, § 4681.

The finding recites that one Gest, duly authorized by the defendant, negotiated with one Hirtzel, a sugar broker employed to sell the sugar for the plaintiffs with such authority as a broker has in law, and that they arranged the terms of the contract of June 12th, 1920, which was then submitted to the plaintiffs and signed by them. The court specifically finds as follows: "The plaintiffs gave no authority to Hirtzel to make any representations relative to the quality and kind of sugar, and signed the contract in ignorance that any warranties or representations, other than those contained in the contract, had been made."

The defendant claimed that this finding should not be permitted to stand as Hirtzel testified without contradiction that he was a broker and had been employed to sell this sugar by the plaintiffs, and that such employment in law authorized him to make warranties.

The court ruled that the mere employment of a sugar broker to sell sugar did not authorize him to make express warranties as to the sugar, nor could an implied warranty arise out of information received by him as to the particular purposes for which the sugar was required. The chief reason for the holding of the trial court, that the plaintiffs made no express or implied warranties, other than those appearing in the written contract, was because Hirtzel had no authority to make such warranties. The defendant claims that Hirtzel as a broker was told the particular purposes the defendant required the sugar for, and that his knowledge so acquired was the knowledge of the plaintiffs, upon the ground that knowledge of an agent is knowledge of his principal, and that the situation is the same as if Gest had told the plaintiffs what he told Hirtzel about the requirements of the buyer. This claim of the defendant cannot be sustained.

There is no finding of any usage or custom attaching any authority whatever to a sugar broker employed to sell sugar. Gest told Hirtzel, the broker in the negotiations, that he wanted sugar for a friend who was engaged in the hotel, restaurant, and confectionery businesses, and who wanted the sugar for those particular purposes. Hirtzel then told Gest that white Java sugar had the same qualities as American granulated sugar and that there was no difference generally between them, but that white Java sugar was not as white as American granulated, was darker in color; and also then gave Gest to understand that the white Java sugar which he had for sale would be suitable to be used by the defendant in his businesses as Gest had described them; and he gave Gest a small glass bottle containing a sample of that sugar. Gest immediately reported to the defendant this offer of sale made by Hirtzel and his conversation with Hirtzel relating to the qualities of this white Java sugar, and showed the defendant the little bottle containing the sample. The court held that a warranty, had such been made by the plaintiffs, that the sugar would be reasonably fit for the purposes of the businesses of the defendant, was broken.

A merchandise broker merely employed to sell certain merchandise is not a general agent of his principal as to such sale, whose statements in the transaction and whose information acquired in the transaction, become the statements and information of the seller. An employment of a broker to sell merchandise by an owner does not import any other authority on the part of the broker than to bring buyer and seller together in order that they may enter into a contract of sale. The broker cannot enter into a contract in behalf of the seller or otherwise bind him. He earns his commission by finding a purchaser at the terms of the vendor. A mere broker in a sale transaction, whether of merchandise or real estate, is one who is employed to bring buyer and seller together in order that they may enter into a contract of sale. Unless specially authorized he has no authority to enter into a contract and bind his employer.

In Story on Agency (9th Ed.) § 28, the author says, in substance, that properly speaking, a broker is a mere negotiator between buyer and seller; he is strictly a middleman, or intermediate negotiator; and for some purposes, as for the purposes of signing (so as to bring a contract within the statute of frauds), he is treated as the agent of both parties. Hobart v. Lubarsky,215 Mass. 528, 102 N.E. 963; McCullough v. Hitchcock,71 Conn. 401, 42 A. 81. Such a broker has no authority to bind the seller by warranties made directly by him or made by implication from knowledge acquired by him. Clark Skyles on Agency, Vol. 2, § 751; Mechem on Agency (2d Ed.) Vol. 1, § 73, Vol. 2, § 2403; 9 Corpus Juris, 512, § 13; Williston on Sales, Vol. 1, § 116 (at end).

A person dealing with such a broker is bound to know the limitations, by law, on his authority. If a person dealing with a broker does not know he is a broker, his ignorance does not enlarge the broker's authority or the principal's responsibility. Story on Agency (9th Ed.) § 225. If he knows that he is dealing with a mere broker, then in the eyes of the law, he knows that the broker cannot bind the seller by warranties made directly by him or made by implication from knowledge acquired by him in the transaction. If the buyer desires warranties directly made or made by such implication, he should have the direct warranties inserted in the contract and inform the seller directly of such facts as will create an implied warranty.

Under the finding Hirtzel had no authority to make an express warranty as to the sugar, nor would information imparted to him create an implied warranty. To the extent indicated the rule of caveat emptor is still effective.

As to this feature of the case relating to warranties, the plaintiffs further claim that, under the Sales Act, General Statutes, § 4681(4), there would be no implied warranty of fitness for a particular purpose because the contract related to a specified article, "white Java sugar," which was dealt in under that trade name. The plaintiffs further claim that the purposes for which Gest stated to Hirtzel that the defendant required the sugar, to wit, for use in his hotel, restaurant, and confectionery businesses, is not such a statement of a "particular purpose" as is intended by the use of that term in General Statutes, § 4681. As we have decided herein that Hirtzel's employment by the plaintiffs as a broker to sell sugar, without any further authorization, did not authorize him to create any express warranties, and that implied warranties binding upon the plaintiffs could not arise out of information coming to him as such broker, it is unnecessary to consider the above claims of the plaintiffs.

The defendant further claims that the provisions of the modified contract of July 21st, 1920, as modified by the agreement of August 9th, 1920, fixed and liquidated the amount of damages which would accrue to the plaintiffs for a breach of the contract by the defendant at the sum of $10,000, of which $7,500 had been paid, and that recovery could be had only of the unpaid balance of $2,500. The provisions of the modified contracts under which this claim is made are found in the third and ninth paragraphs of the modification of July 21st, 1920, and in the modification of August 9th, 1920, set forth in the statement of facts.

The plaintiffs claimed (1) that this agreement as modified is not binding upon them, because the defendant failed to perform, in that he did not pay the plaintiffs the $10,000 agreed upon; and (2) that if treated as equivalent to an agreement fixing liquidated damages, it is ineffective in that it is not a valid agreement for that purpose.

Under these agreements the defendant paid the plaintiffs $7,500, but failed to pay the $10,000 as agreed, and he received credit for the $7,500 in the judgment rendered. An agreement by a seller to accept $10,000 in satisfaction for a breach of a contract to buy, if that amount is paid to the seller and held by him at the time of the breach, is materially a different contract from an agreement that $10,000 shall be the liquidated damages upon a breach of a contract. In the former case the seller, in case of a breach, has the $10,000 in his hands, and no suit for damages for a breach of contract, with its uncertainties, is necessary. That a seller should agree to accept $10,000 to be held by him as compensation in case of a breach of contract, is a materially different agreement from an agreement as to liquidated damages in case he has to bring suit with all the uncertainties of the collection of any judgment. One contract is not the equivalent of the other, and a willingness to enter into the former contract does not establish a willingness to enter the latter.

A buyer who has entered into such a contract as was made here, to pay $10,000 to the seller as compensation in case of breach, must establish the elementary essential of performance, or its equivalent, on his part in order to secure its benefits. This the buyer has failed to do, and therefore these provisions are not available as establishing the extent of the plaintiffs' damages recoverable in this action.

The trial court also ruled "that these provisions were not enforceable because they provided for one sum payable upon a breach, in a situation where compensatory damages would be greatly variant, and so were not enforceable as liquidated damages." It does not appear in the finding, except by inference, what the market value of white Java sugar was on August 9th, 1920, when the last modification of the contract as to this feature of the case was made. Even if we treat these provisions as provisions for liquidated damages, then, to determine whether or not the agreement is invalid because unreasonable, "the court is to put itself in the place of the parties at the execution of the agreement [on August 9th] and, looking forward, attempt to discover what loss they might reasonably have anticipated in view of the conditions [then] presented."Schoolnick v. Gold, 89 Conn. 110, 114, 115,93 A. 124. The trial court, on the facts found, held in substance that on August 9th, 1920, these provisions of the contract were not in harmony with the fundamental rule that compensation shall be commensurate with the extent of the injury.

We said in Banta v. Stamford Motor Co., 89 Conn. 51,54, 92 A. 665, that "``when the nature of the engagement is such that upon a breach of it the amount of damages would be uncertain or difficult of proof, and the parties have beforehand expressly agreed upon the amount of damages and that amount is not greatly disproportionate to the presumable loss, their expressed intent will be carried out.'" That case sets forth the conditions which must co-exist to render such an agreement enforceable, as follows: (1) The damages to be anticipated as resulting from the breach must be uncertain in amount or difficult to prove; (2) there must have been an intent on the part of the parties to liquidate them in advance; (3) the amount stipulated must be a reasonable one, that is to say, not greatly disproportioned to the presumable loss or injury. Under the facts found, we cannot say that the court either illegally or illogically held that the three essential conditions to an enforceable agreement for liquidated damages did not exist on August 9th, 1920.

The defendant further claimed that September 15th, 1920, the date fixed in the amended contract of August 9th, 1920, for the defendant to accept and pay for the sugar, was the date at which damages should have been computed. In the amended contract of July 21st, 1920, the defendant specifically agrees to take and pay for the sugar within thirty days from date, and in the further amended agreement of August 9th, agrees to take and pay for the sugar on or before September 15th. The finding discloses that the plaintiffs, at the defendant's request, continued to extend the time for the defendant to take and pay for the sugar until late in November, 1920. This claim of the defendant is therefore without merit.

The finding discloses that the claim of the defendant under the second count of the counterclaim to recover $200 is entirely without merit.

The changes in the finding sought by the defendant have already been dealt with or are immaterial in view of our rulings.

The defendant's reasons of appeal are not sustainable.

There is no error.

In this opinion the other judges concurred.