Firms may be liable for workers' promises
Published 11/03/98

Successful companies continuously encourage their employees to Ago the extra mile@ to satisfy customer needs. While this is critical to a company=s success, both employees and the company must also appreciate that when an employee commits to provide that extra effort that it would not otherwise be required to provide under the contract with a customer, the company may be liable if the employee is unable to achieve the promised result. In a case decided by the New Hampshire Supreme Court on April 16, 1997, Carrier vs. McLlarky, the Court found that the when the plumber installed a replacement hot water heater in the home of Ms. Carrier, and told her that he believed (but did not promise) that the old unit was under warranty and that he would try to obtain a credit against the cost of the new unit from the manufacturer, Ms. Carrier and the plumber entered into an agency agreement upon which Ms. Carrier was the principal and the plumber was her agent for purposes of attempting to obtain and return any available credit on the warranty.

However, in the Carrier case, the Supreme Court went on to find that no valid warranty existed. Therefore, the manufacturer would not have owed any monies to the plumber who, in turn, had no obligation to credit any amount to Ms. Carrier=s bill. This passes the common sense test as an agent cannot be held liable to the principal simply because he failed to procure for the principal something to which the principal is not entitled. Please note that if the Court had found that the plumber had promised a credit, then the Court would have found the plumber liable. This case stresses the important point that a company may be held liable for promises made by the company=s owners, employees, or agents even if promises are outside the scope of the contract. Therefore, if any extra promise is made to satisfy customer=s needs, the company should direct the employees to put in writing what they are agreeing to and what they are not agreeing to. For example, if the plumber had written on the invoice that he was unsure whether a credit could be obtained, but that he would deliver the old hot water heater to the manufacturer for Ms. Carrier and see what the manufacturer does, neither party would have had a issue as to what was or was not promised.

As stated in previous articles, if an employee promised to a customer to take certain extra steps, even if the company does not authorize that promise, it may still be bound under the doctrine of the apparent agency. Therefore, while it is often prudent to provide customers extra services or goods to make them satisfied, the company should provide clear guidelines to their employees as to what extra goods and services are appropriate under certain circumstances and whether they can be provided with or without supervisor approval. The agent, in turn, should provide to the customer in writing specifically what the company is agreeing to do. This will not only limit the company=s liability for breach of contract or an agency claim, but should further prevent the company=s customer=s frustration in thinking that the company=s employees had agreed to provide certain services and/or goods, where from the company=s perspectives those promises were not made. Finally, it should prevent conflict with customers which, in turn, promotes good business.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, PA whose legal practice includes counseling businesses and business persons on a variety of legal issues and advocating on their behalf. Attorney Marr is also an adjunct professor at Daniel Webster College where he teaches business law. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

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