Taylor v. Ramsay-Gerding Construction Co.

Oregon Supreme Court
345 Or. 403, 196 P.3d 532 (2008)

ELI5:

Rule of Law:

Apparent authority arises when a principal's conduct, when reasonably interpreted, causes a third party to believe the agent has authority to act on a particular matter, and the third party relies on that belief. A principal's conduct can include appointing an agent to a position with generally recognized duties, such as a territory manager, and granting actual authority to perform related tasks.

Facts:

In 1998, H. H. Taylor and C. A. Taylor began constructing a hotel and approved the use of a stucco system called 'SonoWall,' manufactured by ChemRex, Inc.
During construction, Todd Taylor grew concerned about the possibility of the stucco system's galvanized fittings rusting.
In September 1998, the general contractor organized a meeting attended by Taylor and Mike McDonald, ChemRex's territory manager for Oregon, who was brought in as a ChemRex representative to address the issue.
At the meeting, McDonald assured Taylor the system was 'bullet-proof' and, to allay Taylor's remaining concerns, stated, 'did you know you’re getting a five-year warranty?'
Based on McDonald's representations, Taylor agreed to continue with the construction.
In July 1999, after construction was completed, McDonald sent a letter on ChemRex letterhead confirming a five-year warranty on the stucco system, which was forwarded to the Taylors.
By the spring of 2000, the hotel's exterior walls showed significant rust discoloration, but ChemRex did not fix the problem.

Procedural Posture:

In 2001, the Taylors (plaintiffs) sued their general contractor, Ramsay-Gerding, in an Oregon trial court.
In 2002, Ramsay-Gerding filed a third-party complaint against ChemRex, the manufacturer.
In 2003, the Taylors amended their complaint to add a direct claim against ChemRex for breach of express warranty.
At trial, the jury found for the Taylors, concluding that McDonald had apparent authority to issue the warranty.
ChemRex appealed the judgment to the Oregon Court of Appeals (an intermediate appellate court).
The Court of Appeals reversed the trial court's decision, holding that there was insufficient evidence of apparent authority.
The Taylors (as petitioners) sought and were granted review by the Supreme Court of Oregon (the state's highest court).

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Is there sufficient evidence to find that an agent has apparent authority to bind a principal to a warranty when the principal's actions—such as appointing the agent as a 'territory manager,' giving them actual authority to resolve customer issues on-site, and allowing them to use company letterhead—cause a third party to reasonably believe the agent has such authority?

Opinions:

Majority - Balmer, J.

Yes. There was sufficient evidence for a jury to find the agent acted with apparent authority. Apparent authority is established when a principal's conduct leads a third party to reasonably believe an agent is authorized to act. Here, ChemRex's conduct created such a belief by appointing McDonald as 'territory manager,' giving him actual authority to visit job sites, solve customer problems like the one at issue, and communicate with customers on company letterhead regarding warranties. These actions by ChemRex were sufficient to cause the Taylors to reasonably believe McDonald could issue a warranty to resolve their concerns, and the evidence showed the Taylors relied on that belief in moving forward with construction and project close-out.

Analysis:

This decision clarifies the scope of conduct by a principal that can create apparent authority in an agent under Oregon law. It establishes that a combination of factors, including an agent's title, geographic responsibilities, and actual authority for related tasks, can collectively manifest the principal's consent for the agent to act. The ruling reinforces that the third party's reasonable belief is paramount and can be formed based on information channeled through intermediaries, not just direct communication from the principal. This holding makes it more difficult for companies to avoid liability for promises made by agents who appear to have broad authority to solve customer problems.

Gunnerbot

AI-powered case assistant

Loaded: Taylor v. Ramsay-Gerding Construction Co. (2008)

Try: "What was the holding?" or "Explain the dissent"