Opinion ID: 1511669
Heading Depth: 3
Heading Rank: 4

Heading: The Liability of Transcon and JCLHC

Text: It is true that Transcon never gave written approval to the change orders from Nicholson and that in its approval of progress payments to Nicholson it never paid for work done on a change order. It is equally true, however, that several aspects of Transcon's conduct are consistent with an implied promise to pay for the extra work performed by Nicholson. Transcon telegraphed approval and acceptance of Nicholson's conditions and the addendum. It sent its vice-president to a meeting with Nicholson where it was decided that change orders were the necessary route to settle disputes over whether certain work would be done. Transcon had before it written change orders carefully and explicitly detailing the extra work being done. It took no steps to disapprove these change orders or stop the extra work in progress. Quite the contrary, it, as well as all parties involved, was very interested in work progressing to completion. Under these circumstances it is fair to assume Nicholson thought it was doing work for which it would eventually be compensated. In addition, the architect orally approved the extra work. In answer to Transcon's contention that this was not binding because the architect was not an agent of Transcon, we point to Transcon's actions which cloaked the architect with the apparent authority to act in Transcon's behalf, including the meetings with Nicholson and the letter asking the architect to certify sufficient cause to terminate Nicholson. In order to determine whether an agency has been established, the relationship of the parties is scrutinized, and the facts will establish agency whether the parties so intended or understood. Rich Printing Co. v. McKellar's Estate, 46 Tenn. App. 444, 330 S.W.2d 361 (Tenn. App. 1959). Apparent authority in an agent is such authority as the principal knowingly permits the agent to assume or which he holds the agent out as possessing... such authority as a reasonably prudent man, using diligence and discretion, in view of the party's conduct, would naturally suppose the agent to possess. Id. at 376. If it can be shown that the plaintiff held the agent out as having such authority or permitted him so to act, and if the person dealing with the agent knew of the facts, and, acting in good faith, had reason to believe, and did believe, that the agent possessed the necessary authority, then the general rule on apparent authority may be applied. Id. Through Transcon, JCLHC is liable to Nicholson under the implied contract for work performed per the change orders submitted by Nicholson. A principal generally is bound by its agent's acts done in its behalf and within the actual or apparent scope of the agency. Holloway v. Howerdd, 377 F. Supp. 754 (M.D.Tenn. 1973); modified on other grounds, 536 F.2d 690 (6th Cir.1976). The agent ordinarily does not incur liability unless it is shown that he intended to be personally responsible for his actions. See, e.g., Weeks v. Summerlin, 62 Tenn. App. 650, 466 S.W.2d 894 (1970). It could be argued that Transcon assumed such personal liability when it telegraphed its acceptance of the contract conditions and addendum, see Section I, supra. We need not, however, answer this question of Transcon's liability under principles of agency law, for Transcon has indemnified JCLHC in its Assignment and Hold Harmless Agreement, and JCLHC definitely is liable. Just as Transcon's conduct created apparent authority in architect Bekemeyer to act on its behalf, so also did JCLHC act in a manner which created apparent authority in Transcon to act in its behalf. JCLHC involved Transcon in the progress payments to Nicholson. The power to approve or disapprove Nicholson's work necessarily inheres in Transcon's authority to approve progress payments. In addition, JCLHC appears to have acquiesced in Transcon's maintaining contact with and generally directing, through the architect, the project overall. Unlike the Court of Appeals, we are not surprised that Nicholson somehow strangely assumed (in light of the contract) that Transcon had an authoritative interest in the project. Transcon was a part of this project throughout. JCLHC appears not to have been active in the actual direction of the project; it obviously accepted the benefits, however, of the work performed. By creating a situation in which a reasonable person would be justified in his assumption that Transcon could act for JCLHC, JCLHC created apparent authority in Transcon, and as its principal is liable for its agent's actions.