When contracting with a municipality, it is critical that the non-municipal party complete its due diligence. Although the law generally provides a number of rules to help parties harmed by an improper contract, many of those rules are not available when the defendant is a municipality.
In a recent case, Wolverine Engineers & Surveyors, Inc v City of Leslie, the Michigan Court of Appeals considered whether the plaintiff could enforce a contract made by the defendant’s city manager. In Wolverine Engineers, the plaintiff met with the city manager and entered into a contract to provide engineering work on the city’s Main Street Project.
The city manager agreed to supervise the work performed by the plaintiff and to have the city pay for plaintiff’s services. The city manager also represented to the plaintiff that he had the ability to contract on behalf of the city. Despite the city manager’s assurances, the city’s charter set forth that any contract made by the city had to be approved by the city council and signed by the mayor and city clerk. As a result, the court ruled that the contract was unenforceable because the contract was not made pursuant to the city’s charter. The court, relying on precedent, stated that parties dealing with municipalities must take notice of which person or body of the municipality is authorized to enter into contracts.
The Court of Appeals rejected the plaintiff’s claims for unjust enrichment under the same rationale.
Finally, the plaintiff’s argued that the city manager, regardless of whether he had actual authority to enter the city into the contract, had apparent authority to do so. The Court rejected this argument as well noting that municipalities are not “bound when its officers act beyond the limits of their authority.”
Although the Court’s ruling might seem harsh, it is important to remember that the plaintiff had the ability to review the city’s charter to determine whether to not the city manager had the authority to bind the city. As a result, it is critical for any business to conduct its due diligence before entering into a contract with a municipality.
