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The Limited, Inc. v. Rudox Engine and Equipment Company

A-5943-03T5 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTORS; AGENCY—Absent evidence to the contrary, there is nothing that gives a subcontractor the authority to sign agreements or delivery receipts that would be binding on its superior contractor.

A general contractor rented a diesel generator from an equipment company. When the generator was delivered, an employee of one of the general contractor’s subcontractors “signed an invoice delivery receipt and rental contract, which contained an indemnification clause and referenced [the general contractor] as the lessee.” That very night, a fire destroyed much of the property in the warehouse where the generator was being used. The contractor paid the generator rental fee to the equipment company and paid for damage to the generator. Numerous large lawsuits were filed in connection with damage caused by the fire and the equipment company was impleaded in nearly fifty of them. Although it was eventually absolved from responsibility for the fire, it argued that the general contractor should have indemnified it for its legal expenses. It also argued that the Port Authority “owed it a defense under the Port Authority contract with [the general contractor] and the Authority’s comprehensive general liability policy, which named general contractors and subcontractors as additional insureds.”

The lower court and the Appellate Division found that the equipment company was “a ‘materialman’ who simply furnished equipment and did not actually perform any work at the site other than the delivery of a generator.” Therefore, the Port Authority’s contract and the insurance coverage was not available to the equipment company. As to the liability of the general contractor, the equipment company argued that the employee of the general contractor’s subcontractor had “apparent authority” to bind the general contractor “to the rental contract including the indemnification clause.” The lower court concluded, and the Appellate Division agreed, that the subcontractor’s employee “did not have apparent authority to bind” the general contractor because there was “nothing before [the lower court] which establish[ed] the actions of [the general contractor], the principal, [the equipment company or], the third party, to believe that [the subcontractor’s employee], the supposed agent, had the authority to sign the rental contract and bind [the general contractor] to the terms contained therein.”

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