Forming enforceable contracts—agent's authority to contract
Forming enforceable contracts—agent's authority to contract

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Forming enforceable contracts—agent's authority to contract
  • Two types of agent's authority to contract on behalf of its principal
  • What is an agent's actual authority?
  • Agent's actual authority—express actual authority
  • Agent's actual authority—implied actual authority
  • Agent's apparent or ostensible authority
  • Special rules—contracts entered into by directors (company agents)
  • Agent acts in fraud of their principal
  • What is the doctrine of the undisclosed principal?
  • Liability for breach of warranty of authority
  • More...

Two types of agent's authority to contract on behalf of its principal

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.

This Practice Note sets out the key principles governing the authority of an agent to contract on behalf of its principal.

There are two types of authority:

  1. actual authority, and

  2. apparent (or ostensible) authority

What is an agent's actual authority?

Actual authority is a legal relationship between principal and agent created by a consensual agreement to which only the principal and agent are parties.

The general rule is that a principal is bound by the contract of their agent made on the principal’s behalf within the scope of the agent’s actual authority (Freeman & Lockyer v Buckhurst Park).

It does not matter whether the agent, at the time of contracting, identified their principal or simply stated that they were acting for a principal, without identifying them.

Actual authority may be express or implied.

Agent's actual authority—express actual authority

Express authority is given by express words. Whether or not an agent’s entry into a contract is authorised will depend on

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