Mr. Justice Bean,
after stating the facts, delivered the opinion of the court.
There are substantially four questions for decision: (1) Is [156]*156the 40,000 feet excess of 4x12 stuff shipped on. the Airlie to be treated as if purchased under the terms of the contract for the remainder of the cargo? (2) Is the settlement of the controversy about the quality of the lumber between plaintiffs and their vendee, which was made by plaintiff’s agents at the port of discharge, under the authority conferred by defendant’s letter of August 22, 1896, in the nature of an award, and binding on the defendant until impeached or set aside by a court of equity, or were the plaintiffs and those acting for them mere agents of defendant, to represent it in the settlement of such controversy? (3) If the lumber delivered by the defendant conformed to the contract, would that fact alone be a complete defense to this action? (4) AVas there sufficient evidence to cany the question of fraud in the settlement to the jury?
1. AVhen the plaintiffs discovered that the 40,000'feet excess had been placed aboard the Airlie, Mr. Williams, the defendant’s managér, was advised that they would not permit the ship to sail without some understanding as to the excess. Williams said it had been placed on the vessel by mistake, but, as' it could not be conveniently removed, the defendant would do whatever was right in the matter, or would stand good for anything that might crop up regarding it, if the plaintiffs would allow it to remain on the vessel and take it to Chile. With this understanding, plaintiffs received and paid for the excess; but, in our opinion, there was no intention that it should be delivered by the defendant or received by the plaintiffs under the written contract, and therefore the rights of the parties with reference to the excess are not to be determined by the provisions of such contract. The effect of the arrangement was that plaintiffs should take the lumber put aboard by mistake to South America, and there sell it to the best advantage; defendant to reimburse them for any loss they might suffer on account' thereof. This was the theory of the trial court, and there was no error upon this branch of the case.
2. It is contended that, under the authority conferred upon
[157]*157plaintiffs by the letter of August 22d, they had a right, through their Chilian house, to decide the controversy or dispute concerning the quality of the lumber shipped by the Ballochmyle, and that such decision is in the nature of an award, binding on the defendant until impeached in a court of equity for fraud. Where one of the parties to a contract, either before or after a dispute concerning its performance arises, agrees that the other party shall settle or determine the question in controversy, the decision made is binding and conclusive in the absence of fraud (Matthew v. Ollerton, 4 Mod. 226), or, where work is to be done or goods manufactured or furnished to the satisfaction of the employer or vendee, it is for him alone to determine the acceptability of the work or goods, and it is not enough that the refusal to accept was unreasonable or without just foundation: Brown v. Foster, 113 Mass. 136 (18 Am. Rep. 463); Zaleski v. Clark, 44 Conn. 218 (26 Am. Rep. 446); Gibson v. Cranage, 93 Mich. 49 (33 Am. Rep. 351); McCarren v. McNulty, 7 Gray, 139; Tyler v. Ames, 6 Bans. 280. But we do not think this case comes with the doctrine of any of these decisions. The authority of the plaintiffs was derived from the letter of August 22d, which empowered them to adjust the dispute concerning , the quality of the lumber, and, if necessary, to appoint agents at the port of discharge for that purpose ; but it did not authorize them, or their representatives in Chile to act as arbitrators, or to decide the controversy then existing as to the quality of the lumber. Burns, the plaintiffs’ manager, testified that he advised Williams that plaintiffs had received information from Chile that their buyer refused to accept the lumber because of its quality; that he asked him what he intended to do about it, and suggested that he appoint some one to look after the matter, and that Williams said the defendant had no one at the port of discharge that could attend to the settlement, and would leave it to the plaintiffs to do the best they could. Both Burns and Williams testified that the letter of August 22d was the result of this conversation, and was written at the request of Bums for the purpose of putting plaintiffs’ authority in writing. As we construe the letter, the [158]*158plaintiffs were merely authorized to act for and represent the defendant in the settlement of the controversy or dispute about the quality of the lumber, and defendant agreed to be satisfied with any settlement they might make in good faith. Under its contract, the defendant, in the event of a dispute at the port of discharge, was bound to appoint an agent on the spot to represent it in the settlement thereof. . It was this provision that Burns was insisting that Williams should comply with. Instead of appointing some third person, Williams preferred to authorize the plaintiffs to act for the defendant in that regard. If some one*other than the plaintiffs had been appointed, and, in good faith and with reasonable business prudence, had adjusted and settled the controversy by allowing plaintiffs’ purchasers a rebate or deduction on account of the quality of the lumber, the settlement would evidently have been binding on the defendant, even if it afterward appeared that the lumber was in fact up to the requirements of the contract. In such case, it would have been sufficient that a tona fide dispute existed, and that defendant’s authorized agent, in good faith, settled and adjusted it, although he may have been mistaken as to the quality of the lumber. The same rule, it seems to us, should apply to the settlement made by the plaintiffs, acting as the defendant’s agent. They were authorized to act for the defendant in making the settlement, and had a right to employ such agents or means to accomplish that purpose as were customary or usual in such cases; and if they acted honestly and in good faith,' and with proper business caution, the settlement is binding on the defendant, regardless of the actual quality of the lumber. The proof as to the quality was competent and material as bearing on the question of fraud, but good quality alone would not be a defense, if the settlement was actually made in good faith.
3. The charge of the court that, unless the lumber failed in some material particular to fulfill the terms of the contract in respect to quality, the plaintiffs could not recover, evidently proceeded on the mistaken theory that, by the delivery aboard the vessel at Portland of lumber of the kind and quality speci[159]*159fied in the contract, defendant had fulfilled all the obligations on its part. But this view overlooks the provision in the contract that, in case of a dispute arising at the port of discharge regarding the quality of the lumber, defendant was to appoint an agent at that place to settle and adjust the matter.
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Mr. Justice Bean,
after stating the facts, delivered the opinion of the court.
There are substantially four questions for decision: (1) Is [156]*156the 40,000 feet excess of 4x12 stuff shipped on. the Airlie to be treated as if purchased under the terms of the contract for the remainder of the cargo? (2) Is the settlement of the controversy about the quality of the lumber between plaintiffs and their vendee, which was made by plaintiff’s agents at the port of discharge, under the authority conferred by defendant’s letter of August 22, 1896, in the nature of an award, and binding on the defendant until impeached or set aside by a court of equity, or were the plaintiffs and those acting for them mere agents of defendant, to represent it in the settlement of such controversy? (3) If the lumber delivered by the defendant conformed to the contract, would that fact alone be a complete defense to this action? (4) AVas there sufficient evidence to cany the question of fraud in the settlement to the jury?
1. AVhen the plaintiffs discovered that the 40,000'feet excess had been placed aboard the Airlie, Mr. Williams, the defendant’s managér, was advised that they would not permit the ship to sail without some understanding as to the excess. Williams said it had been placed on the vessel by mistake, but, as' it could not be conveniently removed, the defendant would do whatever was right in the matter, or would stand good for anything that might crop up regarding it, if the plaintiffs would allow it to remain on the vessel and take it to Chile. With this understanding, plaintiffs received and paid for the excess; but, in our opinion, there was no intention that it should be delivered by the defendant or received by the plaintiffs under the written contract, and therefore the rights of the parties with reference to the excess are not to be determined by the provisions of such contract. The effect of the arrangement was that plaintiffs should take the lumber put aboard by mistake to South America, and there sell it to the best advantage; defendant to reimburse them for any loss they might suffer on account' thereof. This was the theory of the trial court, and there was no error upon this branch of the case.
2. It is contended that, under the authority conferred upon
[157]*157plaintiffs by the letter of August 22d, they had a right, through their Chilian house, to decide the controversy or dispute concerning the quality of the lumber shipped by the Ballochmyle, and that such decision is in the nature of an award, binding on the defendant until impeached in a court of equity for fraud. Where one of the parties to a contract, either before or after a dispute concerning its performance arises, agrees that the other party shall settle or determine the question in controversy, the decision made is binding and conclusive in the absence of fraud (Matthew v. Ollerton, 4 Mod. 226), or, where work is to be done or goods manufactured or furnished to the satisfaction of the employer or vendee, it is for him alone to determine the acceptability of the work or goods, and it is not enough that the refusal to accept was unreasonable or without just foundation: Brown v. Foster, 113 Mass. 136 (18 Am. Rep. 463); Zaleski v. Clark, 44 Conn. 218 (26 Am. Rep. 446); Gibson v. Cranage, 93 Mich. 49 (33 Am. Rep. 351); McCarren v. McNulty, 7 Gray, 139; Tyler v. Ames, 6 Bans. 280. But we do not think this case comes with the doctrine of any of these decisions. The authority of the plaintiffs was derived from the letter of August 22d, which empowered them to adjust the dispute concerning , the quality of the lumber, and, if necessary, to appoint agents at the port of discharge for that purpose ; but it did not authorize them, or their representatives in Chile to act as arbitrators, or to decide the controversy then existing as to the quality of the lumber. Burns, the plaintiffs’ manager, testified that he advised Williams that plaintiffs had received information from Chile that their buyer refused to accept the lumber because of its quality; that he asked him what he intended to do about it, and suggested that he appoint some one to look after the matter, and that Williams said the defendant had no one at the port of discharge that could attend to the settlement, and would leave it to the plaintiffs to do the best they could. Both Burns and Williams testified that the letter of August 22d was the result of this conversation, and was written at the request of Bums for the purpose of putting plaintiffs’ authority in writing. As we construe the letter, the [158]*158plaintiffs were merely authorized to act for and represent the defendant in the settlement of the controversy or dispute about the quality of the lumber, and defendant agreed to be satisfied with any settlement they might make in good faith. Under its contract, the defendant, in the event of a dispute at the port of discharge, was bound to appoint an agent on the spot to represent it in the settlement thereof. . It was this provision that Burns was insisting that Williams should comply with. Instead of appointing some third person, Williams preferred to authorize the plaintiffs to act for the defendant in that regard. If some one*other than the plaintiffs had been appointed, and, in good faith and with reasonable business prudence, had adjusted and settled the controversy by allowing plaintiffs’ purchasers a rebate or deduction on account of the quality of the lumber, the settlement would evidently have been binding on the defendant, even if it afterward appeared that the lumber was in fact up to the requirements of the contract. In such case, it would have been sufficient that a tona fide dispute existed, and that defendant’s authorized agent, in good faith, settled and adjusted it, although he may have been mistaken as to the quality of the lumber. The same rule, it seems to us, should apply to the settlement made by the plaintiffs, acting as the defendant’s agent. They were authorized to act for the defendant in making the settlement, and had a right to employ such agents or means to accomplish that purpose as were customary or usual in such cases; and if they acted honestly and in good faith,' and with proper business caution, the settlement is binding on the defendant, regardless of the actual quality of the lumber. The proof as to the quality was competent and material as bearing on the question of fraud, but good quality alone would not be a defense, if the settlement was actually made in good faith.
3. The charge of the court that, unless the lumber failed in some material particular to fulfill the terms of the contract in respect to quality, the plaintiffs could not recover, evidently proceeded on the mistaken theory that, by the delivery aboard the vessel at Portland of lumber of the kind and quality speci[159]*159fied in the contract, defendant had fulfilled all the obligations on its part. But this view overlooks the provision in the contract that, in case of a dispute arising at the port of discharge regarding the quality of the lumber, defendant was to appoint an agent at that place to settle and adjust the matter. In other words, the defendant not only agreed to deliver lumber on board the vessel, of the kind and quality called for, but also that, in the event of a controversy as to its quality at the port of discharge, it would, through an agent or representative on the spot, settle or adjust the dispute; and therefore, although the quality of the lumber may in fact have been according to the contract, defendant is still bound by any fair and honest settlement concerning the same at the port of discharge made by its authorized agents or representatives.
4. It is contended that there was no evidence of fraud or want of good faith in the settlement alleged to have been made by the plaintiffs, and that there was error in submitting that question to the jury. As the plaintiffs were the agents or representatives of the defendant, the law exacted from them the utmost good faith (Mechem, Agency, § 454), and slight indications of improper conduct, although insufficient to make out a case of fraud if the parties stood at arm’s length, would be sufficient to raise a presumption against the validity of the transaction, which it would be necessary to overcome by proof: 1 Bigelow, Fraud, 301. Now, there was no direct evidence of fraud, but there was evidence tending to show, and from which the jury were justified in finding, that the lumber delivered by defendant was of the kind and quality called for by the contract, and that the settlement was made without informing it of the nature of the dispute or the amount of reclamation claimed. This, in connection with the fact that the purchasers of the remainder of the cargo accepted it without question, was, in our opinion, sufficient to' entitle the defendant to have the question submitted to the jury as to whether the .discount allowed by plaintiffs or their representatives in Chile to their purchasers, amounting almost to the selling price of the lumber, was so grossly extravagant and unreasonable as to show a want of [160]*160good faith in the settlement. Fraud is a question of fact, but it need not be shown by positive evidence, as this can seldom be done. It is generally proved by circumstantial evidence, and may be established by inference, like any other disputed fact. “To establish fraud,” says Mr. Justice Bradley, “it is not necessary to prove it by direct and positive evidence. Circumstantial evidence is not only sufficient, but in most cases it is the only proof that can be adduced”: Rea v. Missouri, 84 U. S. (17 Wall.) 543. And Mr. Justice Buskirk says: “A court or jury cannot presume the existence of fraud in the absence of evidence, but a presumption may arise from the facts and circumstances proved that the transaction was tainted with fraud”: Farmer v. Calvert, 44 Ind. 209. See, also, Bump, Fraud. Conv. (2 ed.) 582, and Burgert v. Borchert, 59 Mo. 80. Within the doctrine of these cases and the general rules governing the subject, we are of the opinion that there was suf-' ficient evidence to go to the jury on the question of fraud, and that there was no error in submitting it.
Decided 10 November, 1902.
Because of the instruction, however, that, unless the cargo of lumber failed in some material particular to fulfill the terms of the contract in respect to quality, plaintiffs were not entitled to recover, the case must be reversed, and a new trial ordered.
Reversed.