Is my company forced to pay liquidated damages our receptionist unknowingly renewed our contract with a company?

UPDATED: Sep 30, 2022

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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