Is my company forced to pay liquidated damages our receptionist unknowingly renewed our contract with a company?
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Is my company forced to pay liquidated damages our receptionist unknowingly renewed our contract with a company?
When trying to transfer an account with a major waste removal company, our receptionist unknowingly renewed our contract with said company. Now that we are trying to close the account since having found a more affordable company, they are threatening us with extremely costly liquidated damage fees. Is the contract still enforceable even though she is not an authorized signatory for our company? If it makes a difference, she mistakenly left the portion of the agreement that states your position blank, and the representative for the waste removal company still signed it after.
Asked on August 19, 2016 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
There is no easy answer, because it depends on the history of your dealings with this company and the authority and title your receptionist has, and what she told the vendor.
There are two ways an employee can have authority to bind a company. The first is by "actual authority": that is, she has been given the appropriate power.
The second is "apparent authority": this is if the vendor *reasonably* believed the employee had the authority. If the receptionist had never signed anything with them, and they knew she was just the receptionist, then it is unlikely that a court would conclude she had apparent authority--that is, ifyou were sued by the vendor, you'd have a reasonable or even good chance of winning.
But if she has or used with them some other title, like, say, "assistant [or "executive assistant"] to the president" (or VP Operations, or CFO, etc.), or she previously has signed agreements with them, or in the past course of dealing with them, she has "spoken for" her boss (or her boss said "Jane Doe will handle this," etc.), then it may have been reasonable for them to conclude she had the authority to sign the contract. In this case, it is likely that a court would find she had apparent authority and hold you to the contract.
So the answer to your question will depend on the exact facts and history/course of dealing with this vendor. Depending on those things, your company might or might not be liable under the contract.
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