Opinion ID: 2178574
Heading Depth: 1
Heading Rank: 1

Heading: agent who warrants authority

Text: A person who purports to make a contract, conveyance or representation on behalf of another who has full capacity but whom he has no power to bind, thereby becomes subject to liability to the other party thereto upon an implied warranty of authority, unless he has manifested that he does not make such warranty or the other party knows that the agent is not so authorized. Comment: a.    When an agent purports to make a contract, conveyance or representation for a principal, the other party thereto can reasonably assume from such conduct that the agent represents that he has power so to bind the principal. Hence, the rule stated in this Section results from the fact that the agent purports to act as such, although he makes no express representation as to his authority. The agreement by the other party to enter into the transaction with the principal is consideration given by him, so that the representation by the agent becomes effective as a warranty. Restatement (Second) of Agency § 329 (1958). The purported contract's unenforceability against the owners because of the statute of frauds has no effect on Wolfson's cause of action. 3. We recognize that the cause of action for breach of warranty of authority to contract can only exist if the parties purport to have made a legally binding contract. Restatement (Second) of Agency § 329, Comments a & j (1958); 1 F. Mechem, Law of Agency § 1401 (1914). Thus, Beris' argument that Wolfson does not have a cause of action because Wolfson failed to approve the documents before March 13 would be correct if, by his action, Wolfson had failed to conform to the requirements of a counteroffer. In this case, however, no counteroffer requiring approval of the documents before March 13 was communicated to Wolfson. Beris told Silvis to have the documents approved by March 10. Silvis told Smith to have the documents approved by February 28, but Smith told Wolfson to have the documents approved by March 13. Since Smith was Beris' subagent, Wolfson was entitled to rely on the March 13 date. The discussions about other dates by Beris, Silvis, and Smith were not binding on Wolfson unless they were communicated to him. McCray v. Buttell, 149 Minn. 487, 493, 184 N.W. 191, 194 (1921); 2A C.J.S., Agency, § 165 (1972). Thus, Wolfson's approval of the documents on March 13 was timely and in satisfaction of all requirements for creation of a purportedly legally binding contract. 4. In Skaaraas v. Finnegan, 31 Minn. 48, 51, 16 N.W. 456, 457 (1883), we said: If the plaintiffs recover we are of opinion that they are entitled to damages for the loss of their bargain. Today, we reaffirm our position that the plaintiff, Wolfson, is entitled to the benefit of the bargain for which he thought he had contracted. In Skaaraas, however, we also said: If the defendant falsely assumed authority to sell and convey the property, the wrong was immediate, and the just measure of damages is the difference in value between what plaintiffs would have got if the assumed authority had existed, and what they did get.    Their loss is, then, the difference between the value of the price which they agreed to pay, and the market value of the property at the time when the agreement was made. Id. The trial court did not calculate damages as of the time the agreement was made (March 13), but rather calculated damages as of the date of the resale (April 12). Because we believe that a damages calculation based upon either date cannot properly reflect Wolfson's loss of the bargain in this case, we will remand this case for a new damages determination under a modification of the Skaaraas rule. Wolfson's benefit of the bargain, if Beris had been an authorized agent, would be more than just the difference between the property's contract price and its market value on the day of sale. Wolfson would also benefit from the fact that he had a continuing contractual interest in the Nicollet Mall property. As the property value rose, Wolfson's benefit of the bargain would also rise. So long as Wolfson reasonably believed that he had a contract for the sale of the property, he would continue to benefit from the contract. Only when Wolfson learned of Beris's lack of authority would Wolfson become aware that he had been damaged and that he must procure another comparable property. Thus, we hold that in this case the measure of Wolfson's damages includes not only the difference between the property's contract price and its market value on the day of sale, but also any increase in the value of the property up until the time Wolfson learned that Beris lacked authority to contract for its sale. See Restatement (Second) of Agency § 329, Comment j (1958). On remand, therefore, the parties will have to present evidence which will allow the trial court to calculate Wolfson's benefit of the initial sales price as well as evidence of Wolfson's benefit from the increased value of the property up to the time Wolfson learned of Beris' lack of authority. 5. Because this case must be remanded, we find it appropriate to state that the $60,000 award is excessive. The trial court made this award because it concluded that the property was worth $410,000 on April 12. In so concluding, the trial court obviously relied upon Boblett's evaluation of August 31. Boblett's evaluation, however, is not retroactive to April because he based his evaluation in part upon the value of a lease not negotiated until August and in part upon the future existence of the City Center project. The lease did not exist in April, however, and, although plans for the City Center had been drawn before April, the project was further developed in August than in April. Further, Boblett was not asked whether the January or April sale prices were wise ones which reflected the value of the property even though he said that bone fide sale prices might have altered his evaluation of the property. We believe that the March 13 purported sale price and the April 12 sale price may be highly probative evidence of value and that the trial court should seriously consider them as evidence of value on remand. 7A Dunnell Dig. (3rd Ed.) Evidence, § 3247(2), (5), (7), (8) (1974). The judgment is affirmed, the award of damages is vacated, and the case is remanded for a new damages award determination made in accordance with this opinion.