Legal Question in Business Law in California

One of our employees signed us up for a linen service when we first opened our food service business a year ago. We have not had good service from them for almost the entire time and have decided to terminate the service. When we tried, we were told it was a five year contract! Our employee said she was never told that and did not read the fine print on the agreement she signed. They want to charge us over $1500 to cancel. Since neither of the owners actually were involved in signing up for this service, and the employee is not a manager of any kind, and it was not clarified that this was a five year agreement, do we have any grounds to get out of this without paying the money?


Asked on 1/13/16, 9:51 am

2 Answers from Attorneys

There are many issues that arise in relation to your question. You assert that the employee signed up for linen service. Was the employee authorized to sign up for service? Did the owner(s) give that employee authority to obtain linen service? If not, why did you continue to use the service obtained by that employee for a year? These agreements will typically provide for the company to meet standards of the industry and if they are not doing so, there are procedures listed in the agreement for you to follow before you terminate. On the other side, the agreements often provide for attorneys fees and costs to be paid by the customer if the customer terminates prior to the end of the term of the agreement.

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Answered on 1/13/16, 10:00 am

It seems from your question, thought you don't specifically ask it, that you are hoping the employee's status as a non-owner, non-management employee gets you out of the contract. If the employee was, in fact, not authorized to enter into the contract, you needed to rescind the contract immediately upon finding out it had been signed. Being an owner or manager may give certain automatic or at least presumed authority, the opposite is not true. Any employee can be the authorized agent of the business if the business grants them authority. As your agent, the employee bound you to the contract and its terms, whether they read them or not.

The only option for cancelling the contract is if the bad service amounts to a repudiation of the contract or total failure of performance by the linen service. Otherwise your only remedy for the bad service is to demand and if necessary sue for any losses or excess expenses the bad service has cost you.

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Answered on 1/13/16, 10:27 am


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