## Facts

- Dage-MTI, Inc., an Indiana closely held corporation, owned a 30-acre parcel near Michigan City, Indiana.
- Menard, Inc. sought to buy the land for a store development.
- Dage was governed by a six-member board; Arthur Sterling had served as president for at least 20 years and had long run the company with little board oversight.
- In October 1993, Menard offered to buy 10.5 acres; Sterling forwarded the offer to the board and acknowledged board approval was required. The board rejected the offer and identified objectionable contract provisions.
- In November 1993, anticipating a new offer, the board instructed Sterling that he could solicit offers for board review but could not unilaterally bind the company; it also indicated it would reject a new offer containing the same objectionable provisions.
- In December 1993, Sterling negotiated and signed an agreement to sell all 30 acres to Menard for $1,450,000 without returning to the board.
- The signed agreement included provisions the board had previously rejected and stated that Sterling had authority to bind Dage.
- After learning of the signed contract, the board attempted to undo the deal and notified Menard it would not perform.
- Menard sued for specific performance of the land-sale agreement.

## Issues

1. Whether a corporate president had inherent authority to bind a closely held corporation to a land-sale contract when the board had imposed internal limits and did not approve the transaction.
2. Whether the absence of express or apparent authority prevents enforcement of a contract against the corporation when the third party lacked notice of internal limits on the officer’s authority.
3. How loss should be allocated between an innocent third party and a corporation that failed to control or disclose restrictions on its officer.

## Decision

- The Indiana Supreme Court reversed the trial court and Court of Appeals.
- The court held that Sterling, as president, possessed inherent authority in these circumstances to bind Dage to the land-sale contract.
- The court enforced the contract against Dage, entitling Menard to specific performance.

## Legal Principles

- Inherent authority may bind a principal even when the agent lacks express authority and the elements of apparent authority are not met, if the agent’s act is of a type usually associated with the agent’s position and the third party is not on notice of unusual limitations.
- A corporation’s internal governance limits on an officer’s power do not, by themselves, defeat liability to a third party who reasonably relies on the customary authority associated with the officer’s office.
- When a corporation places an individual in a senior office over a long period and permits that person to conduct major transactions, the risk of undisclosed internal limits on authority may fall on the corporation rather than an innocent contracting party.

## Conclusion

The Indiana Supreme Court enforced the land-sale agreement, holding that the corporate president’s inherent authority—grounded in his position and Dage’s long-standing practice of allowing him to manage without meaningful board oversight—bound the corporation despite internal restrictions that were not communicated to Menard.


Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206 (Ind. 2000)