Defendant Failed to Confirm That Distributor’s Employee Had Authority to Enter Into Contract


Fruit and vegetable distributor brought this suit pursuant to the Perishable Agricultural Commodities Act, seeking to be released from potential liability arising out of a written agreement entered into by its fruit buyer with defendant for the delivery of roughly $250,000 in cold storage juice oranges. Plaintiff claimed that defendant was under an obligation to confirm that plaintiff’s fruit buyer had authority to enter into a contract on plaintiff’s behalf and that its failure to do so renders the writing unenforceable. The court granted plaintiff’s request for rescission of the contract and declared that it is not liable for payments pursuant to its terms. The court found that the fruit buyer was aware of the possibility that plaintiff’s owner would quash the transaction if he became aware of its existence. The court concluded that while this is not evidence of fraud, it is the sort of situation contemplated by contract law that requires a party to inquire as to an agent’s authority when making an extraordinary deal.

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Evan S. Schwartz
Founder of Schwartz, Conroy & Hack