Acted outside of his authority in signing the agreement

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Following one year of negotiations, James McDougal signed an agreement to purchase the Bank of Kingston. The sellers were the majority shareholders in First National Bank of Huntsville, the only other bank in the county. The sales agreement included a provision prohibiting the buyer from moving the bank to Huntsville for a period of 1 0 years. McDougal signed the agreement to purchase the bank stock as James B. McDougal, Agent. About three months after the purchase, the board of directors of the Bank of Kingston changed the name of the bank to Madison Bank and Trust. Shortly thereafter, they began efforts to move the bank’s main office from Kingston to Huntsville. The sellers sought an injunction to force the bank to comply with the provision in the sales agreement that prohibited such a move. The bank defended on the grounds that McDougal,

Its president, acted outside of his authority in signing the agreement. Is the covenant not to move to Huntsville enforceable against the bank? Explain.

Reference no: EM13784386

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