Opinion ID: 1801819
Heading Depth: 2
Heading Rank: 1

Heading: Capacity to Contract.

Text: The first essential element of a contract is that the parties have the capacity to contract. 17A Am.Jur.2d Contracts § 23, at 51 (1991); Restatement (Second) of Contracts § 12(1) (1981). Magnusson claims that Dale had actual or apparent authority to act on behalf of her employer. PENCO, however, claims that Dale did not have authority to bind it to a contract. A fundamental principle of agency law is that whatever an agent does, within the scope of his or her actual authority, binds the principal. Dillon v. City of Davenport, 366 N.W.2d 918, 924 (Iowa 1985). In addition, all acts and contracts of an agent, which are within the apparent scope of authority conferred on him or her, are also binding upon the principal. FS Credit Corp. v. Troy Elevator, Inc., 397 N.W.2d 735, 740 (Iowa 1986) (relying on Mayrath Co. v. Helgeson, 258 Iowa 543, 548, 139 N.W.2d 303, 306 (1966)). Apparent authority is authority which, although not actually granted, has been knowingly permitted by the principal or which the principal holds the agent out as possessing. Id. (relying on Helgeson, 258 Iowa at 548, 139 N.W.2d at 306). Apparent authority must be determined by what the principal does, rather than by any acts of the agent. Waukon Auto Supply v. Farmers & Merchants Sav. Bank, 440 N.W.2d 844, 847 (Iowa 1989). We believe there is substantial evidence that Dale had authority to make statements and representations on behalf of PENCO. Clearly, Dale had the authority to tell Magnusson that, according to written administrative procedures, the first agent to submit a completed application, along with the county's budget and an official signature, would be the agent who would receive PENCO's bid for the insurance. PENCO even admits that Dale had authority to make these statements concerning company policy. Because Dale had the capacity to contract, the next question is whether her statement constituted an offer of a unilateral contract.