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Hamilton Hauling, Inc. v. GAF Corp. - 719 S.W.2d 841 (Mo. Ct. App. 1986)

Rule:

When a principal holds out another as possessing certain authority, thereby inducing others reasonably to believe that authority exists, the agent has apparent authority to act even though as between himself and the principal, such authority has not been granted. Apparent authority differs from actual authority in that the principal communicates directly with a third person to create apparent authority; to create actual authority, the principal communicates directly with the agent. 

Facts:

Plaintiff Hamilton Hauling, Inc. ("Hamilton") filed a breach of contract action against defendant GAF Corporation ("GAF") in Missouri state court. The complaint alleged that the parties executed a contract in Feb. 1979 that required GAF to purchase a minimum of over $800,000 of raw materials annually from Hamilton Hauling for a period of ten years. The contract was executed on behalf of GAF by one of its purchasing agents at a local plant. GAF terminated the agent's employment in Sept. 1980, and in Dec.  1980, GAF notified Hamilton that it would no longer accept shipments of materials. Hamilton produced the contract. GAF disclaimed any knowledge of the contract and denied the agent's authority to have made such a contract on its behalf. After trial, a jury rendered a verdict for GAF. Hamilton appealed.

Issue:

Did GAF's agent have the apparent authority to execute a contract on behalf of GAF?

Answer:

No.

Conclusion:

The appellate court affirmed the trial court's judgment for GAF. The court found nothing showing that GAF knowingly permitted the agent to make the contract. The court opined that apparent authority could only have resulted from some act or failure to act on GAF's part, and the agent did not have apparent authority because of his position. The court concluded that no evidence supported Hamilton's claim that it reasonably relied on the agent's authority because Hamilton's other corporate contracts were signed at their headquarters, not at local plants.

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