In Rabone V. TVilliams, ubi supra, that the defendant

could set-off against the plaintiff (the principal) a debt

due to the defendant from the agent, seeing that at the

time the agent made the contract with the defendant he

did not know, nor had any reason to believe, that the ao-ent

was not acting as principal in the matter.

Cooke V. Eshelly (1887), 12 App. Cas. 271 ; here a firm

of brokers sold cotton to Cooke and Sons in their own name,

though really they were selling on behalf of a third party ;

Cooke and Sons knew that they were dealing witli brokers.

94 The law of agency.

but admitted that, though they dealt Avith the brokers as

principals, they had no belief one way or the other whether

they were really dealing with principals or brokers. The

House of Lords held that mone}^ owed by the brokers to

Cooke and Sons could not be set-ofF against the price of the

cotton in an action brought by the third party ; and they

laid it down that a purchaser could never set-ofF a debt

due by an agent against one due to the principal, unless it

could be shown that the circumstances attending the sale

were calculated to induce, and did induce in the mind of

the purchaser, a reasonable belief that the agent was selling

on his own account, and not for an undisclosed principal ;

and that, moreover, it must be shown that the agent was

enabled to appear as the principal by the authority, express

or implied, of the principal.

If there happen to be a particular custom of any trade,

business, or locality, which entitles a third party wdth

whom an agent contracts, to set-ofi' or counterclaim against

the real principal where under ordinary circumstances he

could not do so, such a custom, if unreasonable, will only

bind the real principal, if it can be clearly proved that he

knew and agreed to be bound by it.

Bla.ckhwrn v. Masoii (1893), 9 T. L. R. 286. C. A. ; here

a country broker employed a London broker to transact

certain business on the London Stock Exchange for his

principal ; tlie country broker did not give the name

of his principal when instructing the London broker, but

apparently the latter knew that the country broker was

acting as an agent. It was contended that, by reason of a

custom of the London Stock Exchange, when a London

broker was employed directly by a country broker, he had

a right to tieat the latter as his principal, and to set-ofF

any claim whicli he had against the country broker. The

Court held that the custom in question was unreasonable,

and tliat the |>hiiiitifr (tlic principal) was not bound by it

RIGHTS AND DUTIES OF PRINCIPAL AND AGENT. 95'

unless he could clearly be proved to have known of it, and

to have agreed to be bound by it.

Anderson v. Sutherland (1897), 13 T. L. R. 163 ; here

the plaintiff employed a broker at Paisley, who in turn

employed the defendant, a London broker, to sell certain

shares for him on the London Stock Exchange. The

defendant and the Paisley broker had other transactions,

and when defendant had sold plaintiff's shares, he credited

the Paisley broker in account with the amount realized, in

accordance with a custom of the London Stock Exchange,

The Paisley broker absconded, and plaintiff sued the

defendant for the proceeds of the sale of his shares. Lord

Russell, C. J., gave judgment for the plaintiff, holding that

the defendant was employed under such circumstances that

he knew, or ought to have known, that the country broker

had a principal behind him, and that the custom of the

Stock Exchange in question was unreasonable, and could

only bind the plaintiff if he clearly agreed to be bound

by it.