Clark Advertising Agency (Clark) sued the American Hot Rod Association (AHRA) and its president, James Tice, for payment under a contract for advertising and promotional services. The parties had a previous written contract for advertising services for the 1971 Winter Nationals Race in Phoenix, Arizona, but proceeded under an oral contract for the race in question in West Palm Beach, Florida. Clark and Tice held initial talks regarding expenditures and fees, and they decided that such fees were to approximate those under the prior agreement in Phoenix. Further discussions regarding an increase in fees and costs were held between Clark and two other AHRA officers, the vice president (Ballah) and comptroller (Harkins), however. When Clark presented a total bill under the oral contract seeking the increased fees and costs discussed with Ballah and Harkins, AHRA refused payment and Clark sued. AHRA contended that Ballah and Harkins did not have any authority to bind AHRA during negotiations with Clark. Which of the following is an accurate statement of the court's holding in this matter?

Question

Quizplus · Accepted Answer

The court held that Ballah and Harkins had apparent authority to negotiate the agreement with Clark. Apparent authority arises when a principal creates the appearance of authority in another to a third party, who reasonably relies on that appearance of authority. Here, Clark reasonably relied on Ballah and Harkin's apparent authority to negotiate an increase in fees and costs. The court emphasized that Clark had no reason to believe that Ballah and Harkins lacked authority and that AHRA failed to limit their authority or take any steps to notify Clark of its limited authority.

Clark Advertising Agency (Clark) Sued the American Hot Rod Association