AUTHORITY OF AGENT
AUTHORITY OF AGENT
An agent’s acts are binding
on the principal if they are done within the agent’s authority
If an agent does an act
beyond his authority – principal not bound
Authority may be:
1. Actual
Actual
authority can be of two kinds. Either the principal may have expressly conferred
authority on the agent, or authority may be implied. Authority arises by
consensual agreement, and whether it exists is a question of fact.
An agent, as a
general rule, is only entitled to indemnity from the principal if he or she has
acted within the scope of her actual authority, and may be in breach of
contract, and liable to a third party for breach of the implied warranty of
authority. In tort, a claimant may not recover from the principal unless the
agent is acting within the scope of employment.
Express actual
authority
Express actual authority means an agent has been expressly told he or she
may act on behalf of a principal.
IRELAND v LIVINGSTONE (1872) LR 5 HL 395
Implied actual
authority
Implied actual authority, also called "usual authority", is
authority an agent has by virtue of being reasonably necessary to carry out his
express authority. As such, it can be inferred by virtue of a position held by
an agent. For example, partners have authority to bind the other partners in
the firm, their liability being joint and several, and in a corporation, all
executives and senior employees with decision-making authority by virtue of
their position have authority to bind the corporation.
HELY-HUTCHINSON V BRAYHEAD LTD [1968] 1 QB 549
2. Apparent – not
expressly given but which the law regards the agent as possessing although the
principal has not consented to his exercising such authority
Apparent authority (also called "ostensible authority") exists
where the principal's words or conduct would lead a reasonable person in the
third party's position to believe that the agent was authorized to act, even if
the principal and the purported agent had never discussed such a relationship.
For example, where one person appoints a person to a position which carries
with it agency-like powers, those who know of the appointment are entitled to
assume that there is apparent authority to do the things ordinarily entrusted
to one occupying such a position.
If a principal creates the impression that an agent is authorized but there
is no actual authority, third parties are protected so long as they have acted
reasonably. This is sometimes termed "agency by estoppel" or the "doctrine of holding
out", where the principal will be estopped from denying the grant of
authority if third parties have changed their positions to their detriment in
reliance on the representations made.
RAMA CORPORATION LTD v PROVED TIN AND GENERAL INVESTMENTS LTD [1952] 2 QB
147, Slade J, "Ostensible or apparent authority... is merely a form of
estoppel, indeed, it has been termed agency by estoppel and you cannot call in
aid an estoppel unless you have three ingredients: (i) a representation, (ii)
reliance on the representation, and (iii) an alteration of your position
resulting from such reliance."
FREEMAN & LOCKYER V BUCKHURST
PARK PROPERTIES (MANGAL) LTD [1964] 2 QB 480
Facts
Mr Freeman and Mr
Lockyer sued Buckhurst Park Ltd and its director, Shiv Kumar Kapoor, for unpaid
fees for their architecture work on developing the ‘Buckhurst Park Estate’ in Sunninghill, Berkshire. The company’s articles said that all four directors of the
company (another Mr Hoon, who was never there, and two nominees) were needed to
constitute a quorum. Originally the company planned to simply buy and resell
the land, but that fell through. Kapoor had acted alone (as if he were a
managing director) in engaging the architects, without proper authority. The
company argued it was not bound by the agreement.
Judge
Herbert at Westminster County Court held the company was bound, and the company
appealed.
Judgment
Diplock
LJ held the judge was right and the company was bound to pay Freeman and
Lockyer for their architecture work. He noted that if actual authority is
conferred by the board without a formal resolution, this renders the board
liable for a fine. If a person has no actual authority to act on a
company's behalf, then a contract can still be enforced if an agent had
authority to enter contracts of a different but similar kind, the person
granting that authority itself had authority, the contracting party was induced
by these representations to enter the agreement and the company had the capacity
to act. All those conditions were fulfilled on the facts, because (1) the
board knew about Kapoor’s general activities and permitted him to engage in
these kinds of activities; such conduct represented his authority to contract
for these kinds of things (2) the articles conferred full power to the board
(3) Freeman and Lockyer were induced to contract by these ‘representations’ and
(4) the company had capacity.
THE RAFFAELLA or EGYPTIAN
INTERNATIONAL FOREIGN TRADE CO V SOPLEX WHOLESALE SUPPLIES LTD AND PS REFSON
& CO LTD [1985] 2 Lloyd's Rep 36.
In the case of WATTEAU v FENWICK, Lord Coleridge CJ on the Queen's Bench
concurred with an opinion by Wills J that a third party could hold personally
liable a principal who he did not know about when he sold cigars to an agent
that was acting outside of its authority. Wills J held that "the principal
is liable for all the acts of the agent which are within the authority usually
confided to an agent of that character, notwithstanding limitations, as between
the principal and the agent, put upon that authority." This decision is
heavily criticised and doubted, though not entirely overruled in the UK. It is
sometimes referred to as "usual authority" (though not in the sense
used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with
"implied actual authority"). It has been explained as a form of
apparent authority, or "inherent agency power.
WATTEAU v FENWICK, [1893] 1 QB
346,
The plaintiff, Watteau, supplied
cigars to a beer house named the "Victoria," which was located at
Middlesbrough. The establishment was operated by a man named Humble. Prior to
1888, he had operated the business on his own account, but in that year, he had
assigned his interest to the defendants, Messrs. Fenwick and Company. However,
Humble remained the manager and continued to operate the business as before.
The sign bore his name, and the license was held in his name.
The plaintiff supplied cigars to
Humble. He was at all times unaware of Fenwick's involvement. Indeed, Fenwick
had never given Humble any authority to act on their behalf. But when Watteau
was not paid the 25 pounds owed him, he eventually sued Fenwick.
The County Court held that the
defendants had held Humble out to the world as having general authority, and
that they were therefore liable for the claim because of the implied authority
thereby granted.
Dissatisfied with this outcome,
the defendants then brought an appeal to the Queen's Bench. That court, Lord
Coleridge, Chief Justice, dismissed the appeal. The Court held that once it is
established that the defendant was the principal, then the ordinary rules of
principal and agent apply, notwithstanding the fact that the relationship was
unknown to the plaintiff. The principal is liable for acts of the agent, as
long as those are those usually confided to an agent of that character. This is
true even though the agent was acting outside the scope of his actual
authority.
The Court likened the case to
that of a "dormant partner", in which case the partner would be
liable for acts within the ordinary authority of the other partner
AUTHORITY OF AGENT
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