The Supreme Court of Washington has held that a principal is bound by an agent acting within apparent authority and that the agent’s offer to sell at a price below the authorized price was not, by itself, ground to set aside the transaction. In Udall v. T.D. Escrow Services, Inc., T.D. Escrow Services, the trustee of a deed of trust on a private residence, foreclosed the property at the direction of the lender. T.D. Escrow retained ABC Legal Services (yes, that’s the real name) to conduct the sale. T.D. Escrow advertised the property and stated the property would be sold to the highest bidder.
T.D. Escrow authorized ABC to accept a minimum bid of about $159,000. ABC distributed a sheet at the auction erroneously stating that the minimum bid was about $59,000; Udall bid one dollar more and was declared the winner.
Udall tendered full payment, T.D. Escrow Services refused to convey the property after it discovered the error, and Udall brought suit to quiet title.
Justice Fairhurst held that ABC had apparent authority to sell the property for $59,000 and so T.D. Escrow was bound by the sale contract and was required to deliver title to Udall. Relying on Restatement (Third) of Agency §§ 2.03 and 3.03, she held that the sale notice constituted a manifestation by T.D. Escrow to Udall that caused Udall to believe, reasonably, that ABC was T.D. Escrow’s agent for the sale and was authorized to accept his bid. Justice Fairhurst also found apparent authority from the fact that T.D. Escrow had engaged ABC to engage in a general class of transactions, selling foreclosure properties on its behalf. Finally, the court found that the price discrepancy did not defeat apparent authority in this instance, though the court observed that a gross disparity coupled with “circumstances indicating some additional unfairness” might be sufficient to award equitable relief from consequence of apparent authority.
This opinion is obviously absolutely correct. I have substituted this case for In re Matter of McDuffie on page 96 because the facts are easier, the discussion of Agency law is better, and so the policy discussion is probably more effective. You can find the edited version of Udall, along with Notes and Questions, in the casebook Supplement.