Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 12

Spotlight on Apparent Authority of Managers
FACTS Gilbert Church owned a horse breeding farm in Illinois managed by Herb Bagley. Advertisements for the breeding rights to one of Church Farm's stallions, Imperial Guard, directed all inquiries to "Herb Bagley, Manager." Vern and Gail Lundberg bred Thoroughbred horses. The Lundbergs contacted Bagley and executed a preprinted contract giving them breeding rights to Imperial Guard "at Imperial Guard's location," subject to approval of the mares by Church. Bagley handwrote a statement on the contract that guaranteed the Lundbergs "six live foals in the first two years." He then signed it "Gilbert G. Church by H. Bagley."
The Lundbergs bred four mares, which resulted in one live foal. Church then moved Imperial Guard from Illinois to Oklahoma. The Lundbergs sued Church for breaching the contract by moving the horse. Church claimed that Bagley was not authorized to sign contracts for Church or to change or add terms, but only to present preprinted contracts to potential buyers. Church testified that although Bagley was his farm manager and the contact person for breeding rights, Bagley had never before modified the preprinted forms or signed Church's name on these contracts. The jury found in favor of the Lundbergs and awarded $147,000 in damages. Church appealed.
ISSUE Was Bagley authorized to sign and modify contracts on behalf of Church?
DECISION Yes. The state appellate court affirmed the lower court's award of $147,000 to the Lundbergs. Because Church allowed circumstances to lead the Lundbergs to believe Bagley had authority, Church was bound by Bagley's actions.
REASON A principal may be bound by the unauthorized acts of an agent if the principal leads a third party to believe, or allows a third party to believe, that the agent has authority to perform the act. In this case, Church approved the advertisement listing Bagley as Church Farm's manager and point of contact. Bagley generally was the only person available to visitors to the farm. Bagley answered the farm's phone, and the breeding contract had a preprinted signature line for him. Church was not engaged in the actual negotiation or signing of the contracts but left that business for Bagley to complete. Based on Church's actions, a reasonable third party would believe that Bagley had authority to sign and modify contracts.
CRITICAL THINKING-Legal Consideration What duties to Church might Bagley have violated in this situation?