Problems With Agents Signing Documents on Behalf of Their Clients

Case Study:

This week we continue with a series of emails that will continue over the next several weeks where we will analyze Louisiana Court cases dealing with the duties of real estate agents and how agents breached their duties in some of those cases.

Hopefully, the readers of this email will learn more about what duties are placed on Louisiana real estate agents and how not to breach those duties.

This week, we will discuss below a Louisiana 1st Circuit Court of Appeals case dealing with a real estate agent signing documents on behalf of her client without the authority to do so.

Tresch, et al., vs.  Kilgore, et al., 868 So.2d 91 (La.App. 1 Cir, 11/7/03)

On February 1, 2001, a home inspection company performed a visual inspection of property to be sold.  After the inspection, a home inspection agreement was signed between the home inspection company and the buyer’s real estate agent.  The buyer’s signed the agreement on behalf of her client because the client was not present to sign the agreement.

After closing on the property, the buyers noticed certain defects in the home.  Buyers sued the sellers (for redhibition) and the home inspection company (for negligence).  The Home inspection company argued buyers were bound to an arbitration clause found in the home inspection agreement between the home inspection company and the buyers and, thus, buyers must submit their claims to arbitration before the court system.  The home inspection company believed the buyer’s real estate agent had either express or apparent authority to sign the home inspection agreement as the buyer’s mandatary.

At trial, the buyer’s real estate agent testified that buyer gave her permission to sign her name to the home inspection agreement.  The real estate agent testified that when buyer gave her verbal permission to sign the document, the real estate agent believed she had the right to do so since she was the buyer’s real estate agent

The buyer denied she gave her real estate agent such express authority.

The trial court did not find the real estate agent’s testimony sufficiently persuasive (in other words, the trial court did not believe the agent) and determined that the real estate agent was not given express authority to sign the home inspection agreement for buyers.

Regarding apparent authority, the Court enunciated as follows:

“Apparent authority is a doctrine by which an agent is empowered to bind his principal in a transaction with a third person when the principal has made a manifestation to the third person that the agent is authorized to engage in the particular transaction, although the principal has not actually delegated this authority to the agent.”

According to the Court of Appeals, the buyer did not manifest to the home inspection company that the real estate agent had authority to sign the home inspection agreement.  Thus the agreement signed by and between the inspection company and the real estate agent was not binding on the buyers.  Accordingly, the buyers did not have to submit their claims to arbitration.

A couple of thoughts about this case:

  1. Probably not a good idea for real estate agents to sign documents for their clients without express written authority to do so.
  2. Agents who sign documents for their clients without express written authority to do so run the risk of personally binding themselves to the document signed.

 

For any questions concerning this email, please email me:  rye@tutentitle.com.

H.L. “Rye” Tuten, III, is a Title Attorney/Real Estate Closing Attorney and Owner of Tuten Title & Escrow, LLC. Formerly assigned by RICE Insurance to defend real estate agents throughout Acadiana, much of his more than nine years’ litigation experience is with real estate concerns.

The information contained herein is simply for informational purposes only and not intended to provide legal advice or create an attorney-client relationship.