contract-law
Is Automatic renewal of Custodial Contract signed 10 years ago by board member that only had one year authority enforceable?
<p>We just awarded a new janitorial services contract and sent a termination letter to the old contractor.  The old contractor produces a near 10 year old agreement/contract signed in 2009 with an automatic renewal provision signed by a previous HOA director that only had the authority to obligate the the Association for one year at a time (2009-2010).  Our bylaws limit our authority to obligate these type of contracts to one year.  We did not know the contract even existed.  The contract value is $2,100 per month.  We cover the board with professional liability insurance.  Enforceable?  Professional Liability Coverage Claim?</p>

<h2>The contract is almost certainly enforceable</h2>
<p>The legal doctrine is ostensible or <a href="https://en.m.wikipedia.org/wiki/Apparent_authority#" rel="nofollow noreferrer">apparent authority</a>: if it is reasonable in the circumstances for a third party to believe that a person has the authority to act for an organisation then they do even if they don’t actually have that authority.</p>
<p>For example, it’s reasonable to assume that a grocery store check-out operator has the authority to sell the store’s groceries but not to sell the store.</p>
<p>For your situation it is perfectly reasonable for the contractor to assumes that a HOA director acts with the authority of the HOA simply because they area director. It is not necessary (or reasonable) for the contractor to know the details of the HOA by-laws.</p>
<p>In any event, it would seem the director acted within their authority anyway - they only bound the HOA for 1 year. The HOA could have cancelled the automatic renewal in accordance with the contract at anytime over the last decade.</p>
