Harnischfeger Sales Corp. v. Coats

[320]

LANGDON, J.

This is an action by plaintiff to recover the balance due on a conditional sale contract for the sale of a power shovel. Defendant answered and counterclaimed, setting up the defense of fraud. The jury brought in a verdict in favor of defendant on his counterclaim, in the sum of $2,500. The court, however, gave judgment for plaintiff notwithstanding the verdict, for the entire balance due on the contract. Defendant appealed.

The contract in this case was entered into after negotiations by defendant with plaintiff’s agent, and it is the false representations of this agent which constitute the defense of fraud. After being signed by defendant and plaintiff’s agent, the contract was sent to the eastern office of plaintiff, where it was approved, executed and a copy returned to defendant. The contract contained the following provision: ‘1 This agreement shall not be considered as executed, and shall

not

become effective until accepted by the vendee, and executed and approved by the president, or vice-president, or secretary of the vendor, and it is hereby further declared, agreed and understood that there are no prior writings, verbal negotiations, understandings, representations or agreements between the parties not herein expressed.”

It seems clear that this stipulation limits the authority of the agent to make representations, and purports to absolve the principal from all responsibility therefor. The question is whether such a stipulation may be given effect.

•This problem was the subject of conflicting decisions in California until recently, when this court, in

Speck

v.

Wylie, 1

Cal. (2d) 625 [36 Pac. (2d) 618, 95 A. L. R. 760], announced the governing rule. It was there held that an innocent principal might by such a stipulation

protect himself

from liability in a tort action for damages for fraud and deceit, but that the third party would nevertheless be entitled to