Business contract signed by unauthorized employee

[rzp005]

What is the name of your state (only U.S. law)? New York

We are being sued over a contract that was signed by an employee who was not authorized to sign and bind the company into the contract. Its an S-corp with 3 main shareholders who are the officers of the company. They are the only people authorized to sign for the company on contracts as well as checks.

How does the law see this one?

 

[justalayman]

well, did your company take any action due to the contract. You know, something that would make the other party believe you did agree to the contract?

 

[rzp005]

the contract was for 4 photo shoots for our largest customer. We did 1 or 2 of the 4 photo shoots, but our biggest customer didn't care for the quality of their work, so we had to part ways.

 

[justalayman]

then your actions will show your acknowledgment of the contract regardless of whether you want to claim that particular employee had the authority to bind the company to a contract or not.

 

[tranquility]

Absent specific prior notification (and assuming a few facts as to how the contract came about), an employee will have apparent authority as an agent of the company even if they don't have actual authority. I'd say the contract is good.

 

[HomeGuru]

I agree with the two.