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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
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If an employee signs a contract with a vendor, even though

Resolved Question:

If an employee signs a contract with a vendor, even though they have no authority to sign contracts for the business, is the contract still binding. The one contract was signed with a hazardous waste vendor in 2006 and the company has been paying ever since. It automatically renewed in 2011 for another 5 years, but the vendor recently contacted another one of our employees and got her to sign a new contract for a much higher monthly cost for the remainder of the 3 years. Again, this employee is not allowed to sign contracts on behalf of the company. We are trying to cancel the service because we feel they have been very deceptive, but we don't want to pay their early termination fee. Any advice?
Submitted: 1 year ago.
Category: California Employment Law
Expert:  Patrick, Esq. replied 1 year ago.
Hello and thank you for entrusting me to answer your question. I am sorry to hear about this unfortunate predicament.

Under California law, a company can be held liable for a contract signed by an employee with no actual authority to enter into such agreement if the other party to the contract can demonstrate "ostensible authority," meaning that the employee possessed the apparent authority to enter into the deal.

Specifically, Civil Code section 2300 provides:

"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."

Civil Code section 2317 further provides: "Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess."

Cases have been clear, however, that ostensible authority of an agent cannot be based on the agent's conduct alone; there must be "evidence of conduct by the principal which causes a third party reasonably to believe the agent has authority." Lindsay-Field v. Friendly (1995) 36 Cal.App.4th 1728, 1734

So, an employer in your circumstance could argue that you are not bound by this contract by proving that the employee who signed it had no actual or ostensible authority to do so. This, in turn, would be proven by showing that you took no affirmative action to grant this employee authority or conceded to their taking of such authority.

It's a hard thing to prove, but there is certainly an argument to be made that the contract is not binding. A skillfully worded letter to the vendor, preferably drafted by a knowledgeable local employment law attorney, would ordinary be your best bet under the circumstances.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes to you and thank you so much for coming to Just Answer.
Patrick, Esq., Lawyer
Satisfied Customers: 7517
Experience: Significant experience in all areas of employment law.
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Patrick, Esq.
Patrick, Esq.
California Employment Lawyer
7517 Satisfied Customers
Significant experience in all areas of employment law.