US Court of Appeals, 268 F.2d 357 (1959)
P was the employer for Ds. P stated that Ds made an agreement to provide him with a pension, regardless of his future decision to work, he would be given credit for his 13 years of pension benefits from his former employer. P claims D said he’s get the pension “regardless of what happens.” The agreement between D and P was not put in writing. D, the promisor, was the President of the board of directors. D made the promise on behalf of Jenkins and on his own behalf with respect to P’s pension. P testified under oath that D stated he would even personally cover his pension.
Since this was on appeal, the court found a reasonable jury could find he made the promise.
“A corporation has such offices as are stated in its bylaws or in a board resolution that is not inconsistent with its bylaws. Officers are chosen in a manner prescribed by the bylaws or the board of directors.”
“… the president only has authority to bind his company by acts arising in the usual and regular course of business but not for contracts of an extraordinary nature.”
Whether D making and oral agreement with P for a pension binds the corporation in such a way that the corporation must pay P his pension.
No, remanded. D did not have the “apparent authority” to bind the corporation. There was no “apparent authority” in the form of words or a reasonably formed belief through actions which caused D to believed he had the authority to offer a pension to P on behalf of the corporation, thus binding the corporation. This is found because there was nothing submitted in the evidence which suggested D had the authority to bind the corporation… “the certificate of incorporation and by-laws of the corporation are not in the evidence, nor was any course of conduct shown as between the corporation and D.”
It’s no longer just to allow corporation heads, particularly those in a closely held situation, where the board has very little typical involvement and thus the officers usually undertake extraordinary actions without much supervision or input from the board. These corporations heads should not be able to hide behind the formalities of board rules.