Question

To display desserts in restaurants, Mario Sclafani ordered refrigeration units from Felix Storch, Inc. Felix faxed a credit application to Sclafani. The application was faxed back with a signature that appeared to be Sclafani’s. Felix delivered the units. When they were not paid for, Felix filed a suit against Sclafani to collect. Sclafani denied that he had seen the application or signed it. He testified that he referred all credit questions to "the girl in the office." Who was the principal? Who was the agent? Who is liable on the contract? Explain.

Answer 1

Sclafani is a disclosed principal

Principals are liable for contracts made by an agent when that contract was authorized by the principal.

Explanation:

1) Who was the principal?

Sclafani is a disclosed principal

Principals are liable for contracts made by an agent when that contract was authorized by the principal.

2) Who is the agent?

The office worker

3) Who is the third party?

When a third party, in this case Felix, enters into a contract with a disclosed principal, in this case Sclafani, who is liable on the contract the principal alone

In this case Felix alleged that Sclafani authorized the officer worker to sign and fax the credit application back to Felix. Felix likely alleged that in the event Sclafani did not give actual authority to the officer worker, the officer worker had apparent authority to contract with Felix.

Apparent authority is established when the principal leads a reasonably prudent person to justifiably believe that an agent has authority to act.