## Facts

- A building owner hired Hansen, Hansen & Johnson, Inc. (HHJ) to renovate a building, including designing and installing an exterior glass wall.
- After the wall was completed, it began to leak. HHJ settled the owner’s claim for $81,000.
- HHJ then sought recovery from Fentron Building Products, Inc. (Fentron), a company associated with glass wall products and services, contending Fentron was responsible for the glass used in the wall.
- HHJ obtained the glass through Everett F., a Fentron employee whose title on his business card was “manager of manufacturing services.”
- Fentron provided Everett F. with business cards, an office, and a telephone. His job duties included purchasing materials for manufacturing; customer sales were handled through a separate sales department.
- During a meeting about another project, Everett F. told HHJ that salvage glass was available for sale. HHJ later contacted him about buying it for use in multiple projects, including the wall at issue.
- Everett F. represented that the glass had been rejected from another project because of its color, when it had actually been rejected due to manufacturing defects.
- HHJ accepted an oral offer and did not request a written quotation or other documentation on Fentron letterhead.
- At Everett F.’s direction, HHJ paid for the glass using checks made payable “to” him personally or “on his behalf,” rather than to Fentron. He explained that an initial payment was needed to keep the glass from being destroyed at a salvage yard.
- HHJ believed it was dealing with Fentron, but the transaction occurred without Fentron’s knowledge.
- After a bench trial, the trial court found apparent authority and entered judgment against Fentron. Fentron appealed.

## Issues

1. Whether Fentron’s conduct toward HHJ objectively manifested consent for Everett F. to act on Fentron’s behalf, such that he had apparent authority to bind Fentron to the salvage-glass transaction.
2. Whether Fentron could be treated as the “seller” and held liable on implied-warranty theories for the design and/or materials when the glass was obtained through a person not shown to be acting as Fentron’s agent in the sale.
3. Whether Fentron became bound through implied ratification by knowingly accepting benefits of the transaction, remaining silent when repudiation would be expected, or otherwise acting as if the transaction was its own.

## Decision

- The Court of Appeals of Washington, Division Two, reversed the judgment against Fentron.
- The evidence did not support the trial court’s finding that Everett F. had apparent authority to sell the salvage glass on Fentron’s behalf.
- Because agency was not established for the sale, Fentron was not the “seller” for implied-warranty purposes tied to the design plan and/or the supplies.
- The record did not show Fentron intended to affirm the transaction; implied ratification was not proved.

## Legal Principles

- Apparent authority exists only when the principal objectively manifests to the third party that the principal consents to have the supposed agent act for the principal.
- To bind a principal through apparent authority, the third party must actually believe the person has authority, and that belief must be objectively reasonable under the circumstances.
- The objective reasonableness of the third party’s belief depends on the full context of the transaction, including warning signs inconsistent with a company sale (such as instructions to make checks payable to the individual rather than the company and the absence of normal company paperwork).
- When there is no reasonable basis to infer that the actual seller of a design plan or materials acted as an agent for a principal, the principal is not the seller and is not bound by implied warranties as to the plan’s sufficiency or the supplies.
- Implied ratification requires proof the principal intended to affirm the unauthorized acts, shown by knowingly accepting benefits after learning material facts, remaining silent when repudiation would be expected, or other conduct treating the acts as binding.

## Conclusion

Smith v. Hansen, Hansen & Johnson, Inc. holds that indicia of employment (title, business cards, office, phone) do not, without an objective manifestation from the company and objectively reasonable reliance by the buyer, create apparent authority for an employee to bind the company to a side transaction; absent agency or ratification, the company is not liable as the seller on implied-warranty theories for the materials or related design obligations.


Smith v. Hansen, Hansen & Johnson, Inc., 818 P.2d 1127 (1991)