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What is ‘Apparent Authority’ and How Can it Help You Win Your Georgia Commercial Litigation Case?

You’ve worked to consummate a commercial agreement. Both sides have signed, and you’ve done the work. Now the other side won’t pay and says that the person who signed wasn’t authorized and that there is no binding obligation to tender payment to you. When faced with this situation, you may find yourself needing to litigate to obtain the payment owed to you. When you encounter these and other conflicts, you need experienced Georgia business litigation counsel to handle your case.

A case in which the hypothetical described above happened in real life was when the owner of a north Georgia-based truck parts company requested a proposal from a demolition contractor regarding some work needed on the parts company’s property. Eventually, the contractor made the proposal to the parts company’s owner, Patricia, and one of her employees, Edwin. Edwin signed the proposal in Patricia’s presence while Patricia was on the phone. Having seen Edwin sign proposals for the parts company before, the contractor did not demand that Patricia sign. Instead, the contractor simply got started and completed all of the work outlined in the proposal.

After the work was done, the contractor delivered an invoice to the parts company, but the contractor did not receive payment, so it sued. At trial (and on appeal), the parts company argued that it never had any obligation to pay the contractor because Edwin had no actual or apparent authority to enter into contracts on behalf of his employer. Actual authority refers to situations in which an entity either expressly or impliedly gives specific powers to someone, who takes on the role of an agent of the entity. Apparent authority occurs in situations in which a third party would reasonably believe that the would-be agent had authority to act on behalf of the entity.

In Georgia, if you are seeking to prove that a would-be agent had authority, the law allows you to prove your case with circumstantial evidence. Georgia law also says that “apparent authority to do an act is created as to a third person when the statements or conduct of the alleged principal reasonably cause the third person to believe that the principal consents to have the act done on his behalf by the purported agent.”

The contractor had the evidence it needed to establish that authority existed. It showed that Patricia was present when Edwin signed the proposal. It also had proof that Edwin had handled business for the parts company before, including signing work orders and proposals. Another thing that worked in the contractor’s favor was that the parts company had no evidence that the contractor had any reason to think that Edwin did not have authority to enter into agreements on behalf of his employer. (In the past, Georgia courts have ruled that would-be agents didn’t have authority when the defendant showed that the third party had actual knowledge that an ex-officer of the defendant had been removed from his position.) In this contractor’s case, there was nothing that showed that the contractor knew, or had any reason to believe, that Edwin was not allowed to sign on behalf of the parts company.

For advice and advocacy upon which you can rely to protect your business interests, contact the experienced Atlanta contract litigation attorneys at Poole Huffman, LLC. Our attorneys have many years’ experience providing the legal representation our clients need to meet their business goals. Contact our attorneys online or by calling (404) 373-4008 to schedule your confidential consultation.

More blog posts:

Contractor’s Liens – Part II, Atlanta Business Litigation Attorneys Blog, Jan. 22, 2014

Contractor’s Liens – Part I, Atlanta Business Litigation Attorneys Blog, Oct. 19, 2013

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