Hoddeson v. Koos Bros.
47 N.J.Super 224, 135 A.2d 702 (App.Div.1957).

Facts:
Mrs. Hoddeson bought some bedroom furniture from the defendant’s store, but didn’t get a receipt. The furniture never arrived, and she filed this suit. Apparently, the person that helped Mrs. Hoddeson that day didn’t even work for the store. He was acting as a salesman without the owners’ knowledge.

Issue:
Can the defendant be liable for the actions of an imposter agent?

Holding:
Yes.

Reasoning:
“Where a proprietor of a place of business enables one who is not his agent conspicuously to act as such and ostensibly to transact the proprietor’s business with a patron in the establishment, the appearances being of such a character as to lead a person of ordinary prudence and circumspection to believe that the impostor was in truth the proprietor’s agent, in such circumstances the law will not permit the proprietor defensively to avail himself of the impostor’s lack of authority and thus escape liability for the consequential loss thereby sustained by the customer.”

  • In other words, if you allow fraud due to your own neglect, and it leads a prudent person to believe that the imposter is your agent, you can’t escape liability.
  • The court felt that the “shop at your own risk” adage was out of date with society.

Restatement of the Law (Third) Agency § 2.05: Estoppel To Deny Existence Of Agency Relationship

A person who has not made a manifestation that an actor has authority as an agent and who is not otherwise liable as a party to a transaction purportedly done by the actor on that person’s account is subject to liability to a third party who justifiably is induced to make a detrimental change in position because the transaction is believed to be on the person’s account, if

(1) the person intentionally or carelessly caused such belief, or

(2) having notice of such belief and that it might induce others to change their positions, the person did not take reasonable steps to notify them of the facts.