Corporate Contracting Flashcards
Types of Actual authority
Express: express words, such as when the board of directors passed resolution which authorizes the director to sign certain contract
Implied: from the conduct of the parties, where board appoints person e.g. Appointing a person to be the MD of a company – the appointee has power to do things falling within the scope of that office/position – would impliedly confer on that person the usual authority of MD
* Hely - Hutchinson v Brayhead Ltd
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 (where the occupier of the MD office was a de facto MD). #implied actual authority
• CEO of B had guarantee H that B would inject money into H. H sued B for breach of contract. Issue: whether B was bound by the contract made by CEO
• Held: bound by the contract. The fact that the board had let the CEO continue to act had in fact created actual authority. By working in (and being treated as working in) the office of a MD, actual authority as to all of the acts a MD would normally do exists unless it is otherwise limited
It can be express or implied: Express (express words, such as when the board of directors passed resolution which authorizes the director to sign certain contract) or implied (from the conduct of the parties, e.g. Appointing a person to be the MD of a company – the appointee has power to do things falling within the scope of that office)
o Even if TP is ignorant of the existence of any authority on the part of the agent, so long as there is actual authority, the agent’s acts on behalf of the principal will create rights and liabilities between the principal and TP. Thus, TP do not have to be aware of the agreement between P and A.
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Absence of formal appointment as MD, K commissioned P as architects for its project. D later refused to pay their invoices, saying that the AA prohibited K’s action, requiring all four directors to agree on such actions being taken.
The ability of the holder of an apparent authority to create further apparent authorities
o Holding out - By holder of actual authority- Reliance by the third party
Third party’s belief honest
Third party’s belief rational (Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2) (2010) 13 HKCFAR 479)
o Intra vires
o 4 pre-conditions to establish apparent authority:
(1) a representation made by the principal (company) to the TP that A had authority to enter on behalf of the company into a transaction of the kind sought to be enforced by TP (architects);
(2) Such representation was made by one who had actual authority to manage the business of the company either generally or in respect of those matters to which the transaction relates
(3) inducement (/rely) of the third party by the representation into a contract and
(4) under the company’s constitution, capacity of the principal, i.e. the company, to enter into that contract.
o Lord Diplock CA– definition of apparent authority => the board knew about the director’s activities. The article of association conferred full power to the board. F is induced into contract made by the representation by B. The reliance by the third party is reasonable.
o Held no implied actual authoritydifferent from Hely. Can only be apparentonly silent acquiescence of A’s conduct without communication of their consent to each other and A.
Legal relationship
Apparent authority: made by the principal to TP, the agent is a stranger to this relationship and need not be aware of the existence of the representation
＝> based on an estoppel, arising from the principal’s representation, that prevents the principal from asserting that he is not bound by the transaction.
Actual authority: the principal and the agent
