No Authority
Q: Our board president has entered into a contract with a new general manager. The contract was not presented to the board. It wasn't voted on. Its existence wasn't discovered or published for months. Is the condominium association responsible for the terms of this contract?—Falls Church, Va.
A: Your question raises two issues: whether the president had actual authority to contract in the name of the association without consulting the rest of the board and whether the contract binds the association even if the president lacked actual authority to enter into that contract.
The powers of a president are largely dependent upon the association's bylaws. I would also look at the minutes of board meetings and board resolutions to determine whether such authority had been delegated to the board president. Without reviewing these documents, I cannot determine whether the president had the authority to contract without consulting the rest of the board. However, most association bylaws do not grant such authority. This, coupled with the fact that the existence of the contract was unknown, makes it very likely that the board president acted beyond the scope of his or her actual authority.
Still, the contract might bind the association even if the president was not authorized to enter into that contract. That's because the new general manager might have assumed the president had the authority. In Wright v. Shortridge, the Virginia Supreme Court in 1952 described an agent's apparent authority as follows: "An act is within the apparent scope of (an agent's) authority if, in the view of the character of his actual and known duties, an ordinarily prudent person, having a reasonable knowledge of the usages of the business in which the agent is engaged, would be justified in believing that he is authorized to perform the act in question."
In other words, if it was reasonable for the new general manager to believe that the president was authorized to contract, then the association could be bound by the contract even if the president lacked such authority. Having said that, whether such reliance by the manager would be reasonable could be questioned. I would expect most experienced managers to know that an association acts through a board of directors, not a single officer or director, and would inquire about the board's approval of the contract or the process.
I also would ask whether the board has taken action since discovering the existence of the contract. If not, that could be considered a ratification of the contract.
Deborah Mancoll Casey is a partner with Vandeventer Black in Norfolk, Va., and a member of CAI's College of Community Association Lawyers (CCAL). Shaun J. Bockert, a student at the University of Virginia School of Law, also contributed.
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