Yu Chuck vs Kong Li Po

G.R. No. L-22450. December 3, 1924

Facts:
CC Chen or TC Chen was appointed as general business manager of the newspaper, Kong Li
Po. He entered into a contract with the plaintiffs, Yu Chuck, Mack Yueng and Ding Moon, by
which the latter bound themselves to do the necessary printing for the newspaper for three
years. Before the expiration of the contract of employment , a new manager, Tan Tian Hong,
was appointed; Chen left for China and the services of the plaintiffs were discharged with no
special reason. The plaintiffs then filed a complaint against Ko Ling Po. In its defense, Ko Ling
Po claimed that Chen had no authority to enter into contract of employment.

Issue: WON Chen had authority to bind Ko Ling Po by a contract of employment.

Ruling:
No, the Supreme Court held that Chen had no authority to bind Ko Ling Po by the contract of
employment with the plaintiffs.

It is a general rule that the power to bind a corporation by contract rests in its board of
directors or trustees, but this power may either, expressly or implied, be delegated to other
officials or agents of the corporation. Chen, as general manager of the Kong Li Po, had
implied authority to bind the latter by a reasonable and usual contract of employment only.
In the absence of express limitations, a manager has authority to hire an employee for such
a period as is customary or proper under the circumstances, such as for the year, for the
season, or for two seasons. But unless he is either expressly authorized, or held out as
having such authority, he cannot make a contract of employment for a long future period,
such as for three years, although the contract is not rendered invalid by the mere fact that
the employment extends beyond the term of the managers own employment. Since the
contract entered into with the plaintiffs was unusually long and the conditions are otherwise
onerous to Ko Ling Po that the possibility of the corporation being thrown into insolvency
thereby is expressly contemplated in the same contract, such contract is not within the
authority of Chen and therefore invalid.