Holmes on agency and contract 1891 1

Notes on Oliver Wendell Holmes, "Agency" 5 Harv L Rev 1 (1891-1892).

"A man is not bound by his servant's contracts unless they are made on his behalf and by his authority, and that he should be bound then is plain common-sense." (1)

A pair of central concepts in the theory of legal obligation are that of [1] the authority of the individual acting as principal and [2] the transitivity of that authority once delegated to an individual acting as agent. 

Regarding [1]: this is a bit of natural theory, in that a person acting is the author of their act, independent of any institutional recognition of such authority; it is in that sense that it is natural, rather than conventional or institutional. One is author of their actions even in a state of nature. If that is so, then whatever obligation issues from authority does so even in a pre-institutional state of nature; thus, author-derived-obligation is natural.

Regarding [2]: it is less clear that this is natural, since transitivity is a logical property owing to the logical form of authority, and it is a matter of the philosophy of logic whether such a thing as "the logical form of authority" could be natural. Besides, something feels different once we enter a world of conferred obligations: the social dimension invites regulation (something like a framework of protection against abuse or whatever, or else something like a guarantee that a breach-of-contract proceeding could be carried out, etc.). But what exactly is it that "feels different" here?

I think it may be more than just the social as such. After all, the context of original authority is social as well, as critics of liberal legal and political theory are fond of pointing out. They are clearly right. We are born in families, we discover our egocentric selfhood even as we interact with caretakers and siblings and the rest, and we come into childhood and adolescence forming our character etc in relation to those around us. To hold that authority is natural for being non-social while holding that transferred authority is non-natural for being social would invite these well-founded criticisms.

I think it may be more due to the fact that we transfer authority via acts whose structure is largely linguistic---this is close to circular; I'll fix it as I go---and that are understood by the public that way. Says Holmes:

It is true that in determining how far authority extends, the question is of ostensible authority and not of secret order. But this merely illustrates the general rule which governs a man's responsibility for his acts throughout the law. If, under the circumstances known to him, the obvious consequence of the principal's own conduct in employing the agent is that the public understand him to have given the agent certain powers, he gives the agent those powers. And he gives them just as truly when he forbids their exercise as when he commands it. It seems always to have been recognized that an agent's ostensible powers were his real powers; and on the other hand it always has been the law that an agent could not bind his principal beyond the powers actually given in the sense above explained. (1)

Ostensible authority---authority conferred by explicit action or gesture (on the model of pointing)---is the determinative category, and not any merely intended conferring of authority. (No one can appeal to a mere intention to have so-and-so represent you in a contract negotiation, or else some sort of preference, or whatever. Legal obligation cannot be private and mental, but must be demonstrated and public.) But it doesn't stop there. If "the public" comes to form the belief that so-and-so has conferred authority on this one or that one, then they have. The public understanding of such a conferral is sufficient for that conferral to have become effective. 

But why should that be?

Here is where Holmes' pragmatism becomes very obvious. What other standard could the law use? If the issue is the intention of the one who has authority, then the law is contingent on a reading of something unknowable apart from the very party who is interested in the matter, and thus has a motivation to affect or alter it. That would obviously be a disaster. 

The problem though for this sort of pragmatist starting point is that there's some sort of peril in giving the public the arbitrating role too. The public is not a singular mind, after all, and so may hold conflicting understandings about the conferring of authority (or any other matter). Besides, those who constitute the public may themselves be interested parties, and so may have a stake in how the matter gets settled.

A more generous reading to Holmes is to take "the public" as a kind of quasi-mind, a viewpoint taken from the general good. If we idealize the observer to the conferring of authority, we can abstract away any contingent interest such an observer has in the proceedings at issue, and thus arrive at an unsullied understanding of the conferral of obligation.

But pragmatists tend to hate that kind of abstract move; more on that when I look at Holmes' "Path of the law" essay.