Actual Authority and Apparent Authority Short Summary

The authority of an agent is the act which he is allowed or authorised to do by his principal, and which will bind his/her principal. Usually, the principal will only be bound by the act of the agent if the agent acts within his/her authority. There are two types of authority which an agent could rely on, namely actual authority and apparent or ostensible authority. Actual authority is the authority given by the principal to the agent and could be in written or oral form. The capacity of an agent to act is the same as the capacity of his/her principal.

The express actual authority of an agent means that an agent has been told orally or in written form by the principal to act on his behalf. Hence, the agent’s authority may be restricted by the terms of agreement known as power of attorney. However, if the principal has given a vague or ambiguous express authority to the agent, then any act that can be imputed to any of the possible meanings of the authority will be considered as proper authorisation as long as he/she does in good faith. Implied actual authority is whatever authority that is necessary or incidental to the effective carrying-out of the agency in the usual way.

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An agent usually has implied authority when a person employs him/her to act on behalf of the principal where it is demonstrated in the case of Hely-Hutchinson v Brayhead Ltd [1968] 1 Q. B. 549 at 583 which Lord Denning M. R held that a person that is being appointed to be the managing director of the company has been impliedly authorise to undertake all the things that fall within the scope of that office. The principal must have consented to the agent having authority to act in specific way and thus implied authority can be seen as the actual or real authority of the agent.

If it is found that the principal has not consented, then the agent cannot claim that he/she has the implied authority from the principal. However, in such a case, the third party may rely on the agent’s apparent authority where the leading case in this area was Freeman & Lockyer v Buckhurst Park Properties Ltd [1964] 2 QB 480. It was held that company was liable for the fees although the managing director that had never actually been appointed to that position had no actual authority to contract with third party; he ad apparent authority as managing director. On the other hand, apparent or ostensible authority refers to the expected behavior performed by the agent for an express authority with consent from the principal. It is “the authority of an agent as it appears to others”: Hely-Hutchinson v Brayhead [1968] 1 Q. B. 549. If a third party relies on the apparent or ostensible authority of an agent, the principal is deemed to be bound by the act of its agent, even though the third party has no knowledge of the terms of the agreement between the principal and agent.

In addition, the agent’s apparent or ostensible authority will not be affected by any limitations on the agent’s actual authority of which the third party is unaware. Usually, the principal may represent to the third party that a person has authority to act on the principal’s behalf. However, quite often, the representation which creates the apparent or ostensible authority is inferred by his/her conduct, for example, by appointing a person as a Managing Director of the principal’s business.

A third party who is unaware of any restrictions placed on the arrangement could conclude that such person has authority to contract on behalf of the principal. This can be seen in the case of Panorama Developments (Guilford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 3 All E. R. 16 where a company was bound by an agreement that a company secretary hired vehicles for his own purposes as he had apparent authority. This is because the company secretary was seen as the chief administrative officer of the company and is seen to have all the authorities associated with that position.

Principal will only be bound by the acts of an agent that fall within his/her apparent authority, but in certain circumstances, the principal may bind to the agent’s acts even he/she acted outside the scope of his/her authority. An agent that holds a particular position in an office may hold both actual and apparent authority. Therefore, the agent’s apparent authority is broader than his/her actual authority. Although the agent is limited by actual authority, the principal is still bound by the acts of the agent where in the case of Waugh v H. B.

Clifford & Sons Ltd [1982] 1 Ch 374, it was held that the client has to be bound by the compromise entered into by the solicitor even though the client did not want to compromise. It is within the agent’s apparent authority to sell a property on behalf of the principal to make descriptions of the property to the buyer. However, if the representations made are false, the principal will be liable for the acts of that agent where the leading case is Aliotta v Broadmeadows Bus Service Ltd (1988) A. T. P. R. 40 – 873 which the court held that the agents has mislead the plaintiff by not revealing all the material information to the plaintiff.

An agent with apparent authority is not able to clothe another with such authority. In Crabtree-Vickers Pty Ltd v Australian Direct Mailing Advertising and Addressing Co Pty Ltd (1975) 133 CLR 71, it was held that Peter had no right to enter into contract as he had no official title in the office and BJ had also no actual authority to contract with third party. Hence, no contract is made. In the conclusion, an agent should act within his/her scope of authority as the principal will not be bound if the agent exceeds his/her authority.

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Actual Authority and Apparent Authority Short Summary. (2017, Mar 18). Retrieved from https://graduateway.com/actual-authority-and-apparent-authority/