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    Contracts and Liability on Authority

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    It is my belief (and I could be wrong) that a contract is not valid and a company is not liable if the contract was signed by an employee who did not have the authority to enter into a contract with a third party, i.e. a switchboard operator signs a contract for a cleaning service. What law, if any, absolves the company from liability? And, if the third party should have known this employee did not have the authority to represent the company in contract matters, what law absolves the employee of all liability?

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    https://brainmass.com/law/contract-law/contracts-and-liability-on-authority-155086

    Solution Preview

    There are three types of authority:

    Actual authority- where the Principal's words or conduct leads the agent to believe they have authority.

    Apparent authority- where the Principal's words or conduct leads the Third Parties to believe the Agent has been authorized to act. This is where the Principal will be estopped from denying the grant of authority if Third Parties have changed their positions to their detriment in reliance on the representations made.

    Implied authority- This is authority that is reasonably necessary to carry out express ...

    $2.19