Bauman v. Nutter: Iowa Court of Appeals Holds That an Agency/Principal Relationship May Be Implied From the Parties' Words or Conduct

In Bauman v. Nutter, the Court of Appeals of Iowa addressed the issues of implied agency and specific performance. The court held that an agent/principal relationship may be implied from the parties' words or conduct and the circumstances of a particular case, and that specific performance will be denied to the principal where the agent induces the seller to sign a contract with mistaken terms.

Nutter (seller) listed 151 acres of property with Davitt Realty at a firm price of $750 per acre. The agreement authorized placement on a multiple listing service. Bauman (buyer) first learned of the property from Stanley, a broker who did not work for Davitt, and who was not a member of the listing service. Prior to this referral, Bauman asked Stanley to "keep his eye out and keep him in mind if he found anything suitable." Also, Bauman had previously acquired another piece of property through Stanley and had been satisfied with Stanley's work. After Stanley informed Bauman about the property, Bauman signed an offer.

Stanley took Bauman's offer to Davitt Realty, which informed him of the firm $750 per acre price. Against Davitt Realty's advice, Stanley presented the offer to Nutter. Rather than indicate a price of $750/acre in the offer, Stanley wrote the terms with a net price of $75,500 (which was less than $500/acre). Nutter, who mistakenly believed Stanley was affiliated with Davitt Realty, accepted the offer with those terms. After realizing the mistake, Nutter sought to avoid the contract. Bauman sued Nutter for specific performance. Nutter then sued Stanley for breach of fiduciary relationship, false representation, and negligence. Stanley sued Nutter for the sales commission. The trial court held for Bauman and Stanley. Nutter appealed.

The court first addressed the specific performance claim. The court found that specific performance may be avoided when there is a mistake on the part of the defendants, though such mistake is not such to warrant the invalidating of the contract. The general rule regarding mistake is that a person who signs a written contract without reading it is bound thereby, and is precluded by his own negligence from claiming that he did not know its contents. However, if a person is induced to sign a contract without reading it through some trick or artifice or false representation on the part of another, he is not estopped to deny the validity of the document. The court found that Nutter thought that Stanley worked for Davitt and trusted that the offer included a price of $750/acre. The court held that Stanley, who failed to inform Nutter of the change in the price, procured his signature by "trick or artifice," and that because there was a mistake as to the contract, specific performance should be denied.

The court also addressed whether Stanley's actions were attributable to Bauman, the buyer. The court found that if an agency relationship existed between Stanley and Bauman, that specific performance would not be allowed for Bauman, as he would have the benefit of Stanley's actions, and the trick or artifice would be attributed to Bauman. With regard to agency, an agent/principal relationship "may be implied from the parties' words or conduct and the circumstances of the particular case." The court concluded that Bauman's request to "keep an eye out" for suitable property, his prior acquisition of property through Stanley, and Bauman's acquiescence to Stanley's actions created an implied agency relationship. Thus, specific performance was denied to Bauman.

Bauman v. Nutter, 328 N.W.2d 354 (Iowa Ct. App. 1982).