Atlantic Life Ltd. is in the business of selling a life insurance company. The corporation hired Toby Ryan as its representative in Newfoundland. Toby was provided with Atlantic Life business cards and brochures, and a company car with the Atlantic Life logo on it. A clause in the contract between the parties provided:
The representative will not without the prior approval of the Company incur any liability or debt on behalf of the Company, accept insurance or other risks, revive polices, waive forfeitures, extend the time of payment of any premium or waive premium payment in cash, or make, alter or discharge any contract and will not make any expenditure on behalf of the Company.
Toby negotiated on behalf of Atlantic Life, the sale of a life insurance policy to Sadie Clements, insuring her life for $500,000. Shortly thereafter, Sadie died and her beneficiaries claim benefits under the policy. Atlantic Life refuses to pay on the basis that Toby did not obtain approval of Atlantic for the sale of the insurance policy. Does Atlantic Life have to pay the benefits? Assuming that it does, how could they have prevented this situation?