Ostensible Agency for a Company

People are not always who they seem to be… This case will report on a situation where a person was believed to be acting for himself but actually sought to bind another company, and failed to disclose his true intentions.

People are not always who they seem to be… This case will report on a situation where a person was believed to be acting for himself but actually sought to bind another company, and failed to disclose his true intentions.

The LG Berlin decided last February 18, 2005 (re 7 W 9/05) that anyone who does not clearly reveal for whom he or she is actually acting could be held liable. The company Alberta & Sons GbR had an agent who happened to have a similar last name, “Albert”. The agent Albert engaged in business and was negotiating with the wholesale company Bondioni regarding some purchases. Albert was absolutely certain about everything he said; he never mentioned that he merely.

represented Alberta & Sons. Bondioni was therefore led to believe that Albert was one of the owners of the company. As one might expect, Alberta & Sons did not wish to honor the deal because it was far beyond the competence of Albert, and his decision was also incorrect for operational reasons. Following the rules of falsus procurator, incorporated in §179 BGB, Bondioni demanded fulfillment from Albert. Albert refused to pay. In court, Albert argued that he could not be held liable because Bondioni could clearly distinguish between “Albert” and “Alberta”, and especially “Alberta & Sons”, and that Bondioni knew him as an agent of Alberta & Sons. The District Court of Berlin ruled that anyone who does not clearly disclose his agency gives the appearance of being a competent agent, and, since Bondioni could legally rely on this ostensible agency, Albert was held to pay the price and take the goods. Usually this is the rule for corporate names, but the GbR is not a corporation. The court considered this rule to be applicable to private partnerships as well.

It might sound strange that the ostensible agent was held to fulfill the contract, but this decision lies in the discretion of the person who relied on his agency. Such a person has the legal right according to §179 I BGB to demand either fulfillment or damages.