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Taylor v. Ramsay-Gerding Constr. Co. - 345 Or. 403, 196 P.3d 532 (2008)

Rule:

For a principal to be bound by an agent's action, the principal must take some affirmative step, either to grant the agent authority or to create the appearance of authority. An agent's actions, standing alone and without some action by the principal, cannot create authority to bind the principal. Thus, apparent authority to do any particular act can be created only by some conduct of the principal which, when reasonably interpreted, causes a third party to believe that the principal consents to have the apparent agent act for him on that matter. Additionally, the third party must rely on that belief when dealing with the agent. 

Facts:

While constructing a hotel, plaintiffs Todd and C.A. Taylor, a married couple, became concerned about the possibility that their new stucco system might rust; defendant contractor, Ramsay-Gerding Construction Company organized a meeting with the subcontractor stucco installer, which sent its agent of the stucco manufacturer, among other. At that meeting, the agent made a number of representations to the Taylors, including that they had a five-year warranty, which he later confirmed in writing. A jury found that the agent had apparent authority to provide the warranty and that the principal had breached that warranty, and the trial court entered judgment for the Taylors. The Court of Appeals reversed, holding that the agent did not have apparent authority to bind the principal.

Issue:

Does an agent have apparent authority to bind a principal under Oregon law?

Answer:

Yes

Conclusion:

The supreme court held that the manufacturer gave the agent actual authority to help in processing warranties and to communicate with customers about warranties using the manufacturer letterhead. The agent used that authority to confirm, in a letter, that the owners had a five-year warranty. Furthermore, the manufacturer clothed the agent with the title of "territory manager" and gave him the actual authority to visit job sites and to solve problems, such as the owners' rust problem, that he found there. Because the jury was permitted to find that the owners relied on the letter, it was further evidence that the owners knew of the agent's position. Thus, it was reasonable for the owners to infer that one of the ways in which the agent had authority to allay their concerns was by warranting the system for five years.

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