Romeo, an engineer, owns RR Consulting.Carmen, his wife, is not formally part of the business.In fact, Romeo has repeatedly insisted that she must stay out of the office, but she often ignores his wishes while he is away on business.That happened recently.Julia, who works as an agent for XYZ Construction, entered RR Consulting's office and asked to speak to "someone in charge." Carmen stepped forward and falsely identified herself as "one of the owners of this business." Julia then explained a building project that XYZ had under development and asked if RR Consulting would be willing to provide its services.Carmen agreed to the proposal and signed a contract "on behalf of RR Consulting." When Romeo returned to the office, however, he refused to have anything to do with that agreement.Who, if anyone, is most likely to be held liable to XYZ?

Question

Quizplus · Accepted Answer

Carmen falsely represented herself as one of the owners of RR Consulting and gave the impression that she had the authority to enter into contracts on behalf of the business. This is a breach of warranty of authority, and she can be held liable to XYZ for any damages resulting from the contract. Romeo, as the true principal, may also be held liable, but RR Consulting would not be liable since Carmen acted outside the scope of her authority.

Romeo, an Engineer, Owns RR Consulting