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Video Transcribed: Construction attorney in Tulsa Brian Carter with tulsaconstructionlawyer.com. In this video I’m going to discuss a little bit about when an owner, or whether or not an owner can be bound by the terms of a subcontract, or vice versa, if a subcontractor can enforce the terms of a subcontract against an owner.
The case I’m going to reference actually involves Garth Brooks here in Oklahoma. Mr. Brooks hired a general contractor who subsequently hired a subcontractor to install a home automation system in a house he was building.
The system had problems and there was some payment withheld at the end of the job as a result of the problems, and the subcontractor sued for the withheld funds. The subcontractor in this case argued that Mr. Brooks and the general contractor had a agency-type agreement based on apparent authority and/or the owner ratified the contract.
I’m going to break up this into two parts and talk about ratification later, but with regard to apparent authority, the general contractor is arguing that the contractor was binding the owner to the terms of the subcontract as a result of acting as his agent.
The elements of apparent authority are fairly simple, that there’s conduct that establishes an agency relationship, i.e. a relationship between the owner and the general contractor, reliance by a third party on the principal’s conduct, that would be the subcontractor’s reliance on the conduct of the owner, and that the third party changed his or her position based on that reliance.
As a general rule, a general contractor is not an agent of the owner. The subcontractor works for the general contractor and the general contractor works for the owner.
The court didn’t find that there was an apparent authority established even based on the subcontractor‘s arguments that the owner didn’t warn, Mr. Brooks didn’t warn the subcontractor that the general contractor wasn’t his agent, that the owner didn’t review the contracts and Mr. Brooks didn’t refuse to sign change orders, so that the owner admitted that the general contractor was just to get the job done.
Another, more persuasive argument the subcontractor put forward was that Mr. Brooks was very involved in the process, but even then, the court didn’t find that enough to establish an agency relationship and held that Mr. Brooks was just acting like any other homeowner who never made any representations that the general contractor was an agent, and that as a typical homeowner.
Brooks hired the general contractor to find and manage the subcontractor and also that payment having flown from the owner to the general contractor to the subcontractor was also not persuasive enough to establish an agency relationship.
Next video, I will discuss the subcontractor’s contention that Mr. Brooks ratified the contract. Thank you for listening.