02/09 Agency and Partnership Question

Hanson’s Fruitcakes (Hanson’s) is the largest producer of fruitcakes in the world. The company was founded 150 years ago and uses an original secret recipe closely guarded by the company.

Because of a significant drop in the demand for fruitcakes, Hanson’s decided to expand its product line to include other baked goods that will not compete with its fruitcakes.

Because Hanson’s has limited experience producing baked goods other than fruitcakes, it decided to hire Taster as a consultant. The contract between Hanson’s and Taster provided as follows:

(1) Taster would travel for six months tasting baked goods at “high-end” bakeries. Taster was expressly authorized, on behalf of Hanson’s, to buy the recipes of any baked goods he thought Hanson’s could produce successfully. Taster was expressly prohibited from committing Hanson’s to pay more than $5,000 cash for any one recipe, because market research confirmed that baked-goods recipes typically sold for prices between $3,000 and $6,000.

(2) Hanson’s would disclose to Taster the secret recipe for Hanson’s fruitcake so that Taster would not inadvertently agree to buy any baked-goods recipes that were substantially similar to the fruitcake. Taster is required to keep Hanson’s recipe secret from everyone.

Hanson’s president announced the company’s plans to expand its product line at the annual baking industry trade show attended by everyone in the baking industry. At the trade show, Hanson’s president stated: “Hanson’s is breaking new ground in the baking industry by hiring a consultant, Taster. Taster will be entering into contracts to buy recipes from other bakers on Hanson’s behalf.” Hanson’s president did not disclose the precise terms of the Hanson’s-Taster contract.

Purporting to act on behalf of Hanson’s, over the next four months Taster entered into contracts to buy the following recipes:

(1) Boysenberry-granola muffins for $4,000 from Monumental Muffins,

(2) Almond-pecan tarts for $6,000 from Bakers Bonanza, and

(3) Chocolate truffle cake from Parisian Delights in exchange for a copy of Hanson’s secret fruitcake recipe.

Purporting to act on behalf of Hanson’s, Taster also entered into a contract with Ironcast Enterprises to buy a sophisticated baking oven for $5,000.

Is Hanson’s legally bound to any of the four contracts made by Taster? Explain.