Can apparent authority create contractor liability without direct principal manifestations? Bergdorf v. Salmon Electrical Explained

The Utah Court of Appeals addressed whether an intermediary can bind a contractor through apparent authority when the contractor never directly communicated with the property owner. In Bergdorf v. Salmon Electrical, the court affirmed summary judgment, clarifying the strict requirements for establishing apparent authority in construction relationships.

Background and Facts

Marietta Bergdorf hired Randy Krantz to remodel her medical clinic. Because Krantz’s contractor license had expired, he arranged for Salmon Electrical to serve as the licensed general contractor to obtain permits and satisfy bank loan requirements. Salmon obtained permits, filled out loan documents, and was listed as the general contractor, but never signed a contract or communicated directly with Bergdorf. When the loan failed to close, Krantz independently performed unauthorized demolition work. Construction later resumed in 2014 with Krantz as the acknowledged contractor, using Salmon’s renewed permit without Salmon’s knowledge.

Key Legal Issues

The central question was whether Salmon could be contractually bound to Bergdorf through Krantz’s apparent authority. This required proving: (1) Salmon manifested consent to Krantz’s authority, (2) Bergdorf knew of those manifestations and reasonably believed Krantz had authority, and (3) Bergdorf relied on that apparent authority to her detriment.

Court’s Analysis and Holding

The court held that apparent authority requires manifestations from the principal to the third party, not merely the agent’s representations. While Salmon obtained permits and submitted loan documents, these actions only demonstrated willingness to serve as general contractor if the loan closed—not authority for Krantz to bind Salmon contractually. Critically, Bergdorf was unaware of most of Salmon’s actions and testified that all her relationships were with Krantz. The court found no mutual assent to contract terms, as the parties never agreed on price, scope, or definite terms.

Practice Implications

This decision reinforces that contractors cannot be bound through intermediaries without clear evidence of the contractor’s direct manifestations to the property owner. Practitioners should document all direct communications between principals and third parties when establishing contractual relationships. The ruling also demonstrates that preliminary agreements contingent on financing do not create binding contractual obligations without mutual assent to specific terms.