Question

Caroline was employed as a receptionist for ABC Corporation. Her desk was located at the entrance of the corporate office and her duties were to greet customers, answer telephone calls, sort mail, and respond to general requests for information about ABC. One day, while all of the managers of ABC were out of the office, a representative of XYZ Insurance Co. stopped by to solicit ABC as a new client. He told Caroline that he wanted to find out whether ABC might be interested in canceling its present employee health insurance plan and adopting a plan provided by XYZ. Although Caroline explained that none of the ABC managers were in the office, the XYZ representative nevertheless described his company’s health insurance plan in detail. When Caroline reacted by stating that XYZ’s plan sounded better than the current ABC plan, the XYZ representative immediately produced a contract for Caroline to sign. Reluctantly, Caroline signed the contract accepting the offer to adopt XYZ’s insurance plan. If XYZ seeks to enforce the contract against ABC, is ABC bound to the contract?

How much authority does an employee have to bind a business into certain contracts which may or may not benefit the business? Find a case that you can utilize to answer this question.

(300 words in total) PLEASE DO NOT PLAGIARIZED, DO OWN, NO COPY AND PASTE

Answer 1

Caroline had signed the health insurance binding contract with XYZ company. We need to analyze whether Caroline had the authority to sign contracts on behalf of ABC company.

Caroline used to work as a receptionist in ABC company. Her primary duties involved answering calls and directing them to relevant authorities, greeting people coming to the office, making entries in the visiting register and looking after the administration of the registration. Her scope of responsibility was limited to that. She did not have the authority to represent ABC company in front of other companies and sign contractual documents on behalf of the company.

Generally a principle agent relationship exists between employer and employees of an organization. Under the agency relationship, the principle gives the authority to the agents to represent the organization to the outside trade. The principle will be held accountable for all the decisions taken and actions done by the agent while representing him under the agency relationship. This is known as vicarious liability. However if the agent has not been given the authority to do something and he does the same, then the principle cannot be held accountable for the deeds and actions of the agent.

In the given case, ABC company did not give any authority to Caroline to represent them in front of other companies or external agents. Caroline was a part of the support functionality of business. She did not have any role or responsibility pertaining to the core functionality of business. Moreover ABC Company did not give any intimation to XYZ Company that Caroline has the signing authority of the company. Hence XYZ company has no rights to enforce the contract against ABC Company.