## Facts

- Husky Industries, Inc. manufactured charcoal briquets and sought to acquire Craig Industries, Inc.’s Mountain View, Missouri charcoal plant.
- Craig Industries was a closely held corporation; D.C. (Dwane) Craig served as its president and was a principal shareholder and director.
- Craig contacted Husky and met with Husky’s vice president and attorney to inspect and inventory the Mountain View plant.
- A written “Letter Offer to Purchase” was prepared and modified to list Craig Industries, Inc. as seller; Craig signed it as president.
- Husky paid $25,000 as a down payment toward the proposed purchase.
- Craig presented the proposal to the corporation’s board of directors, which rejected the sale; the corporation returned the $25,000 to Husky and repudiated the transaction.
- Husky sued Craig Industries for specific performance or breach damages and sued Craig individually for misrepresenting his authority to bind the corporation.
- After a bench trial, the court entered judgment for Craig Industries on the contract counts but awarded Husky $14,400 against Craig personally on the authority-misrepresentation theory.
- Craig alone appealed the personal judgment.

## Issues

1. Whether a corporate officer who signs a purchase agreement on behalf of the corporation impliedly warrants that he has authority to bind the corporation, and is personally liable in damages if the corporation is not bound due to lack of authority.
2. Whether the third party’s actual or constructive knowledge of limits on the officer’s authority defeats the officer’s personal liability for breach of the implied warranty of authority.

## Decision

- The court affirmed the judgment against Craig for $14,400.
- By executing the purchase document as president, Craig represented and impliedly warranted that he had authority to bind the corporation to the sale.
- Because the board repudiated the sale and the corporation was not bound, Craig lacked the authority he impliedly represented.
- The record supported the finding that Husky neither knew nor had reason to know of any limitation on Craig’s authority.
- Craig’s good-faith belief in his authority did not bar liability once authority was lacking and Husky lacked notice.

## Legal Principles

- A person who purports to act as an agent and to bind a principal by contract impliedly warrants that he has authority to do so.
- If the principal is not bound because the purported agent lacked authority, the purported agent is personally liable for resulting damages, unless the third party knew or should have known of the lack of authority.
- Liability for breach of the implied warranty of authority is distinct from liability on the underlying contract and does not require proof of intentional fraud.
- In the absence of warning signs, a third party is not required to investigate internal corporate authorization to preserve a claim for breach of warranty of authority.

## Conclusion

The court held that a corporate president who signs a purchase agreement without actual authority impliedly warrants authority and is personally liable for the third party’s damages when the corporation repudiates and the third party lacked notice of the authorization defect.


Husky Indus., Inc. v. Craig Indus., Inc., 618 S.W.2d 458 (Mo. Ct. App. 1981)