Question

Laura one of ray and paul’s salespersons, anxious to make a sale, intentionally quote a price to a customer that is $500 lower than Festa had authorized for that particular product. The customer purchases the product at the quoted price. When Festa learns of the deal, it claims that it is not legally bound to the sales contract because it did not authorize Laura to sell the product at that price. Is ray bound by the contract? Explain.

Answer 1

Ray is bound by the contract under law of agency.

Step-by-step explanation:

Law of agency states that when a third party interacts with a representative of another party, any agreement that is made between them and the representative is binding on the other party.

When one is an agent of a company in this case Fests, she has implied authority to make an offer on behalf of Fests. The offer made is binding on Festa even though they did not authorise sale of the product for $500 less than their normal price.