This is an extract of our Delegated Authority document, which we sell as part of our Company Law Notes collection written by the top tier of University Of Otago students.
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Company Law Section 4: Delegated Authority: Company = distinct legal authority, but can only act through individuals. Meridian: Acts of a company can be equated with acts of an individual. General Agency Rules:
1. Actual authority
2. Apparent (Ostensible) Authority
3. Usual (Customary) Authority Freeman and Lockyer v Buckhurst Park:
- Actual authority: May be express or implied delegation of the power or authority to enter into a particular contract or a type of contract.
- Person must have authority to delegate in the first place
- Complication arises when the employee uses the authority for an improper purpose.
- Apparent/Ostensible Authority: When employee or agent is exceeding their actual authority but someone has made a representation to the contractor that the agent has authority. General Requirements for when Apparent Authority will arise:
1. Representation that agent has authority to enter into that contract or type of contract
2. Representation has to be made by someone with actual authority
3. That the contractor was induced by such representation to enter into the contract
4. That the company had the capacity to enter (or to delegate authority to enter) into the contract.
- Usual/Customary Authority: When representation occurs because of the individual's position or title.
- Company had 4 directors, but no MD. Kapoor acted as managing director - board intended that he do whatever required to sell the company's land.
- The board has actual authority, and by permitting agent to act in a managing position, they give him authority. "Directors allowed Kapoor to act as if he was the company's managing director" "An actual authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties" "An apparent or ostensible authority on the other hand is a legal relationship between the principal and the contractor created by a representation that the agent had authority to enter into a contract on behalf of the principal" "a contractor has constructive notice of the constitution of the principal" "Kapoor had apparent authority to enter into contracts on behalf of the company. The board knew that throughout Kapoor had been acting as managing director" MacMillan Inc. v Bishopsgate: Provided the contracting party was unaware of a wrongful use of authority, there would still be a valid contract. Hopkins:
- Mr Talley managing director of parent co. and subsidiary co.
- Responsible for marine insurance dept, and had authority to enter into insurance contracts.
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