## Facts

- David T. Chase, an experienced investor, negotiated to buy the Fuller Brush Company division from Consolidated Foods Corporation.
- Consolidated’s vice president, secretary, and general counsel, Newman, led negotiations for the company and drafted key writings.
- In June 1975, the parties signed a “letter of intent” expressly conditioned on negotiating a definitive agreement and board approval; Chase later cancelled after further review.
- On November 17, 1975, the parties signed a letter confirming “salient economic terms” of Chase’s offer, including a requirement that Chase provide $5 million in cash, but leaving unresolved terms (including pension liability calculation) and omitting a closing date.
- Chase sought financing and believed a lender would require proof of board approval.
- On November 26, 1975, Newman sent a telegram stating that the board “ratified” approval of an executive committee’s “agreement to sell” based on the November 17 terms.
- The board had not approved a final sale; it approved the November 17 letter only as a basis for further negotiations.
- Negotiations later failed and no sale closed.
- Chase sued for breach of contract, arguing the November 17 letter plus the telegram created a binding, board-approved agreement and that Newman had apparent authority to bind the corporation.
- At trial, the court instructed the jury that apparent authority must rest on the principal’s manifestations, not the agent’s self-asserted authority, and excluded certain evidence of other Consolidated dealings offered to show a pattern supporting Newman’s apparent authority.
- A jury returned a verdict for Consolidated; Chase appealed.

## Issues

1. Whether the district court’s apparent-authority instruction, emphasizing that apparent authority must arise from the principal’s manifestations rather than the agent’s statements, misstated Illinois law or misled the jury in a corporate setting.
2. Whether the district court abused its discretion by excluding evidence of other negotiations or transactions to prove Newman’s apparent authority or Consolidated’s course of dealing, and whether any error required a new trial.

## Decision

- The Seventh Circuit affirmed the judgment for Consolidated Foods.
- The jury instructions, considered as a whole, adequately stated Illinois law on apparent authority and did not prevent Chase from presenting his theory.
- The exclusion of proffered “other deal” evidence was within the district court’s discretion given risks of confusion and collateral disputes, and any arguable error was not sufficiently prejudicial to warrant a new trial.

## Legal Principles

- Under Illinois law, apparent authority must be based on manifestations attributable to the principal, not on an agent’s declarations about the scope of his own authority.
- In the corporate context, “principal manifestations” may occur through authorized corporate organs (e.g., board resolutions or official communications), but the requirement remains that the authority be traceable to the corporation’s conduct, not merely an officer’s assertion.
- Writings that leave essential terms open and contemplate further negotiation support a finding that no binding final contract was formed.
- Trial courts have broad discretion to exclude marginally probative evidence that risks jury confusion or mini-trials on collateral matters; reversal requires a showing of prejudicial error affecting the verdict.

## Conclusion

The court upheld a defense verdict where the writings and board action supported a finding that negotiations had not matured into a board-approved sale contract, and where the plaintiff failed to show that the corporation, through its own manifestations, created apparent authority for the officer’s representation of final approval.


Chase v. Consolidated Foods Corp., 744 F.2d 566 (7th Cir. 1984)