Legal Question in Business Law in California

An employee who was NOT authorized to do so, signed a contract for janitorial supplies. This contract allegedly locks us in to using the service for 5 years. The contract says that if we want out of the contract before the five years are over then we must pay a large fee to them.
My question would be is that sort of requirement legal? The employee who signed it was not authorized to sign any sort of contract by the owner of the company, is that a possible way to get out of this situation?

Asked on 2/09/10, 3:44 pm

4 Answers from Attorneys

Edward Hoffman Law Offices of Edward A. Hoffman

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Yes, but it's not an ironclad argument. Even employees who lack actual authority to sign contracts for their employers can have what the law calls apparent authority. Apparent authority exists when the employer gives the other contracting party reasonable grounds to believe that the employee can bind the company to a contract. An employee can't give apparent authority to himself, but his employer can do so inadvertently. What matters is whether the other party reasonably believed, due to the employer's actions or inactions, that the employee could enter into a contract on the employer's behalf.

Also, even if your employee lacked both actual and apparent authority, your company may still be bound to the contract if it ratified the agreement after learning about it. Making a payment can be enough to ratify the deal.

If you want to get out of the contract you should consult with a lawyer ASAP.

Answered on 2/14/10, 3:57 pm

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Daniel Bakondi The Law Office of Daniel Bakondi

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I would want to see their basis for apparent authority, and then challenge it. A letter may clear it up. If they continue to pursue, I need to examine the business relationship a little more closely to advise.

Best,

Daniel Bakondi, Esq.

[email protected]

415-450-0424

The Law Office of Daniel Bakondi

870 Market Street, Suite 1161

San Francisco CA 94102

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Answered on 2/15/10, 9:34 pm

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Jonathan Reich De Castro, West, Chodorow, Glickfeld & Nass, Inc.

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Although I have not seen the "contract" things are generally not as "ironclad" as they might seem and there may be many different defenses, including those suggested by the other responders. You should consult with a lawyer right away as starting or continuing to use that service could be argued to be an acceptance of what was otherwise a voidable contract.

Jon Reich

310.478.2541

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Answered on 2/18/10, 11:08 am

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