No. Fentron is not responsible for the bad deal. For a company to be on the hook for an employee's actions, the company itself must have done something to make the customer reasonably believe the employee had permission. Just giving an employee a title, business cards, and a phone isn't enough to make a customer think he can make any deal he wants. More importantly, the customer's belief wasn't reasonable here because there were huge red flags. Being asked to pay an employee directly instead of the company is very suspicious. HH&J should have called Fentron's main office to check if the deal was legitimate when these warning signs appeared.

No, Fentron isn't responsible for what Foster and Kapp did. Just because Foster had a manager title and business cards doesn't mean he could sell things for Fentron. HH&J should have checked more carefully if Foster could really make deals for Fentron, especially when Foster asked for checks to be written to him personally. Fentron also didn't do anything to make it seem like they were okay with what Foster and Kapp did after finding out about it. When Fentron asked for payment for materials later, that was just because they provided those materials, not because they agreed to the whole deal Foster made. So, I'm saying the first court was wrong and HH&J can't get money from Fentron.

No. An employee does not have apparent authority to bind an employer where the principal's manifestations are insufficient to create a reasonable belief of such authority, and where suspicious circumstances should have put the third party on notice to inquire further. Apparent authority must be based on the objective manifestations of the principal, not the agent. Here, Fentron's actions—employing Foster as a 'manager of manufacturing services' and providing him with an office, phone, and business cards—were insufficient to manifest that he had the authority to sell products. The title itself does not customarily imply sales authority. Furthermore, HH&J's belief in Foster's authority was not objectively reasonable. Several 'red flags,' including Foster's request for checks payable to himself personally and his refusal to sign a written contract on behalf of Fentron, put HH&J on notice that further inquiry with Fentron's management was necessary. The court also rejected the claim of ratification, finding that Fentron’s actions after discovering the fraud were merely assertions of its rights as a materials supplier and did not demonstrate an intent to affirm Foster's unauthorized contract.

No. I find that neither Foster nor Kapp had apparent authority to bind Fentron in contracts with HH&J because Fentron did not make sufficient objective manifestations to create such authority. Fentron's employment of Foster as a 'manager of manufacturing services' and provision of an office, telephone, and business cards were not enough to reasonably suggest he had authority to sell products or enter contracts. The title itself does not imply sales authority, and there was no evidence that such a position is generally understood to have that power. As for Kapp, there were no representations about his authority made by Fentron at all. While HH&J subjectively believed Foster and Kapp were authorized, this belief was not objectively reasonable given the circumstances, such as Foster requesting checks be made out to him personally. Furthermore, Fentron did not ratify any unauthorized contracts because it did not affirmatively act to adopt the contracts after becoming fully aware of the material facts. Fentron's demand for payment for materials supplied was consistent with its lien rights as a supplier and does not indicate ratification of a larger contract. Therefore, I reverse the trial court's decision and direct dismissal of the complaint against Fentron.

Smith v. Hansen, Hansen & Johnson, Inc.

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