Week 1 - Flashcards
1. Separate Legal Personality 2. Actual, Implied and Ostensible Authority 3. Indoor management rule
Which courts are Company Law matters dealt in?
Small Companies (under £120k) in County Court Larger Companies or more complicated matters in Chancery - High Court.
Criminal matters in Crown (High level) or Magistrates (Low Level).
Legal Person / Real Person
Company is a legal person
Human / Director are real persons
Agency Problem
Companies are legal persons who cannot make decision, so natural person in form of director acts as Agent of the company (principal) to enter contracts
Actual Authority
Given by board of directors / Articles to:
- Directors
- Non directors but managers by delegated authority
- Implied actual authority “inherent to the position” ie a sales manager
Ostensible Authority
No formal agreement between agent and principal.
Company represents to 3rd party agent has authority.
3rd party relies on representartion
3rd Party can argue that contract is binding
If agents exceed authority
Contractors can rely on CA 2006 S40 to protect themselves
Indoor Management Rule
CA 2006 S40
“ A third party is not bound to inquire about the authority within the company”
CA 2006 S40
” A third party is not bound to inquire about the authority within the company”
Indoor Management Rule
As long as acting in good faith
Freeman v Brackhurst
- Representation that mr Kapoor had authority to contract.
- This was made by person with actual authority.
- Freeman and Lockyer induced by Buckhurst companies representation.
- Even though mr Kapoor didn’t have actual authority, he was given Ostensible Authority.
Royal bank v Torquand
director borrowed money from bank,but power to borrow was limited by shareholders. Upon liquidation torquand argued director didin’t have authority to borrow, so contract no binding.
Court held, contract was binding because not role of bank to check if directors had authority.
Indoor management rule as incorporated in CA 2006 S.40
