Opinion ID: 2628688
Heading Depth: 4
Heading Rank: 1

Heading: Authority to act

Text: Askinuk argues that the lease is void because Smith acted without authority to bind the corporation. We focus here on whether Smith had apparent authority to sign the lease for Askinuk. [5] Apparent authority to do an act is created as to a third person when a principal's conduct, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him. [6] Three considerations are pertinent in evaluating apparent authority: (1) the manifestations of the principal to the third party; (2) the third party's reliance on the principal's manifestations; and (3) the reasonableness of the third party's interpretation of the principal's manifestations and the reasonableness of the third party's reliance. [7] There is no real dispute here about the first two elements. The closer question is whether it was reasonable for the school district to rely on Smith's apparent authority to sign the lease. In the official commentary to AS 10.06.020-.025 of the Alaska Corporations Code, legislative counsel recognized that a third party's belief in the real authority of a corporate agent must go beyond the `white heart and empty head' standard of subjective `good faith'. [8] Nonetheless, we have held that a third party need not investigate the extent of an agent's authority or deal only at its peril. [9] It is undisputed here that Smith informed the school district that Askinuk's shareholders had approved the lease. There is also no evidence that any Askinuk representative said anything to the school district before Smith and Superintendent Robertson signed the lease that would have led the school district to think either that the shareholders had not approved the proposed lease or that they were uninformed of the material provisions of the lease when they voted. It is also undisputed that Askinuk held Smith out as the chair of its board of directors. There is consequently no genuine material factual dispute as to this issue it was reasonable for the school district to believe that Askinuk had authorized Smith to sign the lease on its behalf. We accordingly conclude that Smith had apparent authority to sign the lease and bind Askinuk.