Facts
The case concerns a sole proprietorship "Sport H." owned by A. H., in which his son G. H. is employed as a staff member. G. H. concluded a contract for the establishment of a new sports store with U. AG on behalf of the company. When the contract was not implemented, U. AG sued A. H. for damages.
The Federal Supreme Court dismissed the claim, as G. H. had not effectively acted on behalf of his father, and U. AG was also not entitled to rely on a power of attorney.
Considerations
According to the principles of liability based on trust under Art. 33 para. 3 CO, a principal may be bound by a contract if the agent has acted without authority, but the third party was entitled in good faith to rely on the existence of a power of attorney.
However, the Federal Supreme Court found that G. H. as an employee had concluded a third-party transaction, not his own transaction, in the name of his father. However, U. AG could not be entitled to rely on the fact that G. H. had the authority to conclude the contract in question.
Although G. H.'s behavior created the appearance of a power of attorney, as he negotiated in his father's business premises and used company…