Q&As

Can a third party rely on ostensible/apparent authority where they know the person signing a document is an employee of a company not a director and they sign as a director and in the name of that director?

read titleRead full title
Published on LexisPSL on 13/06/2017

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Can a third party rely on ostensible/apparent authority where they know the person signing a document is an employee of a company not a director and they sign as a director and in the name of that director?
  • When does the concept of apparent or ostensible authority arise?
  • The doctrine of ultra vires
  • Ratification
  • Breach of warranty of authority

When does the concept of apparent or ostensible authority arise?

In the context of contract law, 'authority' is the power an agent has to affect the legal relations of its principal. Where such authority exists, the agent will have the power to bind the principal to contract. Where such authority is absent, or the relevant act is outside the scope of the relevant authority, the contract will not be binding upon the principal. A person (A) may be bound by a contract entered into by another (B) with a third party (C) if A, by words or conduct, has represented to C that B has authority to contract on A’s behalf. This is known as the doctrine of apparent or ostensible authority.

In summary, Commentary: Authority to bind the company: Boyle and Birds' Company Law [6.13] explains that:

‘…to bind the company under the doctrine of ostensible (or apparent) authority, a person who has no actual authority to act on the company's behalf may be able to bind the company if he has been held out by someone with appropriate authority as a duly authorised agent of the company. The doctrine of ostensible authority is part of the general law of agency and it applies irrespective of whether the principal is a company or a natural person. A special modification of the doctrine known as the 'rule

Related documents:

Popular documents