Tag Archives: principal

Independent contractor’s email was key factor in finding he had apparent authority to bind principal

Defendant petroleum producer hired an independent contractor to negotiate oil and gas leases on its behalf. One such lease was with plaintiff, which the independent contractor negotiated in large part using the email account defendant issued to him. After the price of oil dropped, defendant would not pay on the lease. When plaintiff sued, defendant claimed its independent contractor did not have the authority to bind defendant to the lease in the first place.

The trial court disagreed with defendant’s argument that its independent contractor did not have apparent authority to bind the principal-defendant. Defendant sought review. On appeal, the Court of Appeals of Texas affirmed.

It held that a reasonably prudent person would have believed the independent contractor possessed the authority to contract on defendant’s behalf because defendant acted with such a lack of ordinary care as to clothe the independent contractor with indicia of authority.

Among the most important evidence concerning these indicia of authority was the fact that the independent contractor communicated using the email account under defendant’s domain name. The court noted that another court had held that giving someone a company email address does not, in and of itself cloak that user with carte blanche authority to act on behalf the company. “Were this so, every subordinate employee with a company e-mail address—down to the night watchman—could bind a company to the same contracts as the president.” CSX Transp., Inc. v. Recovery Express, Inc., 415 F.Supp.2d 6, 11 (D.Mass.2006)

But in this case, defendant knew of the independent contractor’s negotiations by email, and did nothing to disclaim that he lacked authority to bind defendant to the lease.

PanAmerican Operating, Inc. v. Maud Smith Estate, — S.W.3d —, 2013 WL 3943091 (Tex.App.-El Paso, July 24, 2013)