Question

Bo Borg is the vice president of purchasing for Crater Corp. He has authority to enter into purchase contracts on behalf of Crater, provided that the price under a contract does not exceed $2 million. Dent, who is the president of Crater, is required to approve any contract that exceeds $2 million. Borg entered into a $2.5 million purchase contract with Shady Corp. without Dent’s approval. Shady was unaware that Borg exceeded his authority. Neither party substantially changed its position in reliance on the contract. What is the most likely result of this transaction?

Answer 1

Answer: Crater will be bound because of Borg's apparent authority.

Explanation:

Crater Corp. will be bound to the contract since Bo Borg has the apparent authority as the acting Vice President of purchasing. Even though he went over the agreed amount that was over 2 million in the contract. Since the Shady company was unaware that he had exceeded his authority the contract will stay in place. If Shady company had of known that he did not have the final say and needed approval the result of the transaction would of been different.