An Arkansas buyer and seller enter into a purchase agreement. The seller is a corporation, and the purchase agreement is signed by the corporation's vice president. Later, it is discovered that the corporation's bylaws require board approval for real estate sales, and no such approval was obtained. Under Arkansas contract law, what is the most likely status of this purchase agreement?
Correct Answer
C) The contract may be voidable or unenforceable if the vice president lacked actual authority to bind the corporation
Under Arkansas contract law, a corporation is bound by contracts signed by its authorized agents. If the vice president lacked actual authority under the corporate bylaws (which required board approval), the contract may be voidable or unenforceable as against the corporation. While apparent authority could create liability in some circumstances, the buyer's knowledge of corporate formalities and the specific bylaw requirement affects the analysis. The most accurate statement is that the contract's enforceability is in question due to the lack of actual authority.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
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