ABC Corp. owned a restaurant called XYZ. The corporation president, T.J. Jones, hired a contractor to make repairs at the restaurant, signing the contract, "T.J. Jones for XYZ." Two invoices for restaurant repairs were paid by ABC Corp. with corporate checks. Upon presenting the final invoice, the contractor was told that it would not be paid. The contractor sued ABC Corp. Which of the following statements is correct regarding the liability of ABC Corp.?
- It is not liable because Jones is liable.
- It is not liable because the corporation was an undisclosed principal.
- It is liable because Jones is not liable.
- It is liable because Jones had authority to make the contract.
Answer(s): D
Explanation:
Choice "d" is correct. Where an agent enters into a contract on behalf of a principal and discloses the existence and identity of the principal and acts with authority, the principal is liable and the agent is not liable. Here, Jones signed the contract with an indication that he was signing for the corporation. The president of a corporation is an agent of the corporation and has apparent authority to enter contracts that appear to be within the ordinary scope of the corporation's business. The restaurant repairs here appear to be with the scope of ABC Corp.'s business. Therefore, ABC Corp. will be bound because Jones had at least apparent authority.
Choice "a" is incorrect, per the rule stated above.
Choice "b" is incorrect. The president signed as acting on behalf of the corporation, thus disclosing the principal.
Choice "c" is incorrect, per the rule stated above.