MIAMI BUSINESS LITIGATION: BREACH OF CONTRACT AND “APPARENT AUTHORITY”

Florida businesses are responsible for the contractual obligations arising from agreements that the business authorized their employees to enter. In certain circumstances, however, a Florida business can be responsible for contractual obligations even when the employees lacked actual authority to agree to the contract. The legal doctrine of “apparent authority” can apply to make a contract binding on the company under certain circumstances giving an employee the appearance of authority to bind a company to a contract. Peter Mavrick is a Miami business litigation attorney, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Corporations and limited liability companies can only act by and through their authorized agents, such as employees or company officers. An employee of a company can only act with the authority that he or she has been given. “As a general rule, a principal may be held liable for the acts of its agent that are within the course and scope of the agency.” Roessler v. Novak, 858 So. 2d 1158, 1161 (Fla. 2d DCA 2003). Sometimes, an employee of a company will exceed the authority given to her and enter into unauthorized contracts which purport to bind the company.

Even if the company had never actually given its employee the authority to enter into a contract, that company may still be responsible for the obligations in the contract if the company allowed or caused conditions that gave the appearance to an outside party that the employee had the authority to enter into the contract. “Under Florida law, actual authority is not necessarily a precondition of an agency relationship.” Borg-Warner Leasing, a Div. of Borg-Warner Acceptance Corp. v. Doyle Elec. Co., Inc., 733 F.2d 833 (11th Cir. 1984). “An agent’s authority need not be conferred in express terms, but may be implied or apparent under justifying circumstances.” All Seasons Condo. Ass’n, Inc. v. Patrician Hotel, LLC, 274 So. 3d 438 (Fla. 3d DCA 2019).

An employee of a company establishes apparent authority by appearance. “It is well-established that an agent’s authority may be inferred from acts, conduct and other circumstances.” Bd. of Tr. of City of Delray Beach Police & Firefighters Ret. Sys. v. Citigroup Glob. Markets, Inc., 622 F.3d 1335 (11th Cir. 2010). For example, if a company issued to an employee a business card showing that she is an officer or a position that would likely enter into contracts, it would suggest that the employee had authority to enter into a contract. A person entering into a contract with company can usually rely on this apparent authority unless “circumstances are such as to put a reasonable person on inquiry” that the employee might not actually have authority. Stiles v. Gordon Land Co., 44 So. 2d 417 (Fla. 1950).

For an employee or agent of a company to bind the principal in contract based on “apparent authority,” there must be “(1) a representation by the purported principal; (2) reliance on that representation by a third party; and (3) a change in position by the third party in reliance upon such representation.” Lensa Corp. v. Poinciana Gardens Ass’n, Inc., 765 So. 2d 296 (Fla. 4th DCA 2000). A Florida business attempting to enforce such a contract must show each of these three elements before the doctrine of apparent authority can apply to bind the unauthorized contract.

An employee does not bind the employer/principal simply from the employee’s actions alone, even if the employee “ingeniously create[s] an appearance of authority by their own acts.” Taco Bell of California v. Zappone, 324 So.2d 121 (Fla. 2d DCA 1975). “‘Apparent authority’ does not arise from the subjective understanding of the person dealing with the purported agent, nor from appearances created by the purported agent himself; instead, ‘apparent authority’ exists only where the principal creates the appearance of an agency relationship.” Izquierdo v. Hialeah Hosp., Inc., 709 So. 2d 187 (Fla. 3d DCA 1998). The rationale for this requirement is that a company “permit[ing] an appearance of authority […] justif[ies] a third party’s reliance upon the appearance of authority.” Roessler v. Novak, 858 So. 2d 1158 (Fla. 2d DCA 2003). Thus, even a stranger with no affiliation with a company can bind that company in a contract if the company knew about the stranger and allowed her to continue, because that company would be responsible for allowing the stranger to have an appearance of authority.

Determining whether an employee entering a contract has the apparent authority to enter into that contract depends on the circumstances leading to the agreement and the extent to which the company allowed the employee to have the appearance of authority.

Peter Mavrick is a Miami business litigation lawyer, and represents business litigation clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.