Legal Question in Business Law in California

Re: Service Agreements

There's an entire law school course on "Agency" including topics such as the "actual" and "apparent" authority of the alleged "agent." In other words, it depends.

Re: Service Agreements

It can be, if the company subsequently ratifies the agreement (either expressly or by its actions) or if it has conducted itself in a way that led the other party to reasonably believe the employee had such authority.

Re: Service Agreements

Whether an employee has the power to bind his employer in contract depends upon the law of agency.

Let's assume the company is a corporation or an LLC. Neither one has the ability to pick up and move a pen without human assistance, so obviously someone must sign all agreements on behalf of the corporation or LLC. As corporations got larger and their organizational structurez became more complex, a whole body of law developed as to who was an agent of the corporation and for what purposes. Here are some excerpts from the Civil Code, showing the section numbers:

2295. An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.

2296. Any person having capacity to contract may appoint an agent, and any person may be an agent.

2297. An agent for a particular act or transaction is called a special agent. All others are general agents.

2298. An agency is either actual or ostensible.

2299. An agency is actual when the agent is really employed by the principal.

2300. An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him.

.........

2315. An agent has such authority as the principal, actually or ostensibly, confers upon him.

In practice, the ostensible authority of a corporate agent is usually related to the person's title, and to a lesser extent by what the agent claims to possess. A corporation's office manager probably has ostensible, if not actual, authority to order copier paper from OfficeMax, and hence can bind the corporation to pay for ordered paper. On the other hand, a vice president probably does not have ostensible authority to approve a merger, but may have the power to bind the corporation to a five-year commercial lease.

Many contracts require the person who signs on behalf of the corporation or LLC to sign under the words "hereto duly authorized" or the like, to signify that the signer holds himself out to be a duly-authorized and empowered agent of the entity.