Siegel v. Spear

Appellate Division of the Supreme Court of New York · Contracts

Contractsapparent scope of authoritycredit manstorage agreementpromise to insureforbearancemutual benefitfire loss

Facts

Plaintiff bought household furniture from defendant on installment terms, paying part in cash and part through chattel mortgages, and had paid $295 total. Before leaving the city for the summer, plaintiff asked defendant for permission to remove and store the furniture under the sale agreement, and defendant's credit man, McGrath, arranged to store it in defendant's warehouse without charge. According to plaintiff's evidence accepted by the jury, when plaintiff said he would insure the goods through his own acquaintance, McGrath said defendant could obtain insurance more cheaply and would take out insurance for the full amount, sending the premium bill with the June installment. The furniture was stored in defendant's warehouse and was destroyed by fire on June 15, 1918, without insurance having been procured.

Issue

Whether defendant was bound by McGrath's promise to procure insurance on the stored furniture, and if so, whether that promise was supported by consideration and what damages plaintiff could recover for defendant's failure to insure after the furniture was destroyed by fire.

Rule

An agent acting within the apparent scope of his authority to arrange storage may bind the principal to related terms, including an agreement to procure insurance on the stored property. A promise to insure is supported by consideration where the promisee abandons his own plan to obtain insurance in reliance on the promisor's undertaking, and mutual interest in the property may also support the promise. Where there is no proof that the promisee had actual notice that insurance was not obtained, damages for breach are measured by the value of the property up to the amount of insurance the promisor agreed to procure, less the amount still owed to the promisor on the purchase price where appropriate.

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In Buffalo, Nora Levin bought custom office equipment from Harborline Furnishings on installment payments. Before moving temporarily to Syracuse, she asked Harborline's account manager, Evan Pike, for permission to place the equipment in Harborline's storage room under the sales contract; Evan arranged the storage, said Harborline would insure the equipment during storage, and the company accepted the equipment without objecting to his authority. A fire later destroyed the equipment, and no insurance had been obtained.

If Nora sues Harborline for breach of the promise to procure insurance, which is the strongest argument that Harborline is bound?

Explanation. The majority held that when an agent is acting for the principal in arranging storage, and the principal accepts the goods and does not suggest the agent lacked power, the agent has apparent authority to make related terms within that transaction's apparent scope. A promise to insure property during storage is sufficiently related to the storage arrangement. The opinion did not require written authority or actual authority for every detail.