Legal Question in Business Law in California

Re: Authorized Officers of Corporation

There are two points of view from which this question needs to be addressed: within the corporation itself, and with respect to transactions with outsiders ("third parties").

Within the corporate structure, it depends partly on the bylaws and partly upon delegation of authority from the top (board of directors) down. In some corporations, the duties of the president are rather tightly reined in by board policy or perhaps bylaws that restrict presidential powers.

In other corporations the reverse is true, and regional managers and assistant vice presidents have very broad powers.

This is within the organization. The law is somewhat different with respect to outsiders. Various offices are often presumed to carry certain authority; for example, a third party vendor probably has the right to rely upon the apparent authority of the corporate president to run up a $100 cherge, for example, at the local office-supply store. The fatc that the president required board approval to purchase a box of paper clips would not relieve the corporation of liability, since a third party is allowed to make reasonable assumptions that corporate officers possess adequate authority to carry out the usual functions of their offices. This is a rather fuzzy standard, but it is necessary to make the business world function.

An officer who violates his or her internal authority may be liable to the corporation for resulting harm, but an officer who acts within apparent authority will make the corporation liable to the outsider.