John owns Lounge Co., a company that rents furniture to consumers for short periods of time. Lounge wants to purchase 30 couches that are for sale by Global Co., a furniture distributor. John hires Patty, who has never worked for Lounge before, to negotiate a deal with Global. John instructs Patty to pay no more than $15,000 for the couches. Patty negotiates the terms of the purchase with Global, but Global refuses to accept less than $20,000 for the couches. Knowing that Lounge needs to increase its couch inventory, Patty agrees to the $20,000 purchase price on behalf of Lounge and signs a valid contract on behalf of the company. Will Lounge be contractually bound to purchase the couches for $20,000? Assume that neither Lounge nor Patty has ever worked with Global before.

Answer rating: 100% (QA)

Lounge is not contractually bound to purchase the couches for 20000 for the following reasons La... View the full answer