1. Did Mike McDonald have the title “territory manager” and have actual authority to visit job sites and resolve problems?

2. Did Mike McDonald have actual authority to provide a purchaser with a five-year warranty on parts and labor?

3. Did the court find that ChemRex had provided Mr. McDonald sufficient actual authority to perform certain tasks, so as to create apparent authority to issue the five-year warranty on parts and labor to resolve the job site problem in this case?

While constructing a hotel in Lincoln City, Oregon, the owner, Todd Taylor, became concerned about possible rusting in the exterior stucco system manufactured by ChemRex that was being installed at the hotel. The general contractor Ramsay-Gerding arranged a meeting with the owner, the installer, and ChemRex’s territory manager for Oregon, Mike McDonald, to discuss Mr. Taylor’s concerns. McDonald told those present that the SonoWall system was “bulletproof against rust,” and stated that “you’re getting a five year warranty.” He followed up with a letter confirming the five-year warranty on parts and labor. A year later rust discoloration appeared, and no one from ChemRex ever fixed the problem. Taylor sued ChemRex for breach of warranty. ChemRex defended that McDonald did not have actual or apparent authority to declare such a warranty.

JUDICIAL OPINION

BALMER, J.… A principal can create the appearance of authority “by written or spoken words or any other conduct * * *.” Restatement at § 27. For example, when a principal clothes an agent with actual authority to perform certain tasks, the principal might create apparent authority to perform other, related tasks.…

Similarly, when a distant principal places an agent “in charge of a geographically distinct unit or branch[,]” that may lend weight to a finding of apparent authority, depending on the circumstances. Restatement (Third) of Agency § 3.03 comment d (2006). For example, if the principal structures its organization so that the “branch manager”— or territory manager—“makes decisions and directs activity without checking elsewhere in the organization[,]” that may create apparent authority to commit the principal to similar transactions. Id.

We turn to the application of those principles to the actions of ChemRex at issue here. Using the standards discussed above, we conclude that there is sufficient evidence in the record to support the jury’s finding that McDonald acted with apparent authority when he warranted the stucco system to plaintiffs. The first issue is whether ChemRex took sufficient steps to create the apparent authority to provide a warranty. Significantly, ChemRex gave McDonald actual authority to help in processing warranties and to communicate with customers—about warranties—using ChemRex letterhead. Indeed, McDonald used that authority to confirm, in his July 1999 letter, that plaintiffs had a fiveyear warranty. Furthermore, ChemRex clothed McDonald with the title of “territory manager” and gave him the actual authority to visit job sites and to solve problems, such as plaintiffs’ rust problem, that he found there. McDonald also had the authority to sell an additional ……………………