Brief Fact Summary. The Defendant, Behee (Defendant), offered to purchase property from Mr. and Mrs. Smith (the Smith’s). To cement his offer, Defendant paid a deposit of $5,000, which he placed in escrow with the Plaintiff, Hendricks (Plaintiff). Later, a dispute arose as to whether the dealings between Defendant and the Smiths lead to a binding contract. The Court awarded Plaintiff $997.50 for his services and returned the rest to Defendant. This action is the appeal of that award by the Smiths.
Synopsis of Rule of Law. This case stands for the proposition that, when forming an agreement through an agent, the knowledge of the agent is crucial to the acceptance and manifestation of assent in an agreement.
Issue. The issue presented here is whether the knowledge of an agent can be imputed to its principal.
While the Smiths did sign the agreement on March 4, 1987, their intention to accept the offer was not communicated to Defendant until after he had withdrawn his offer. An uncommunicated intention to accept cannot be binding on an offeror who had no knowledge of the acceptance.
Also, in an agency relationship, notice to an agent acting on behalf of its principal is considered constructive notice to the principal and is binding on the principal. In this case, the Smith’s real estate agent was notified that Defendant was withdrawing his offer. Because this notification came before Defendant was given Notice of the Smith’s intention to accept Defendant’s offer, it was binding.
Discussion. The rules of Agency should be taken into consideration when the agreement process is studied. If a principal is disclosed, then any action of the agent and any knowledge of the agent is imputed to the principal. When entering into an agreement through an agent, it is essential that a principal understand this concept.