I’m really confused by Agency Law. Am I right in thinking if an agent has ostensible authority, the directors are bound on the contract by the 3rd party because they held him out, the principle can’t sue the agent because they will claim they had ostensible authority (no one stopped them)?
On the otherhand, if the agent knew he didn’t have authority (as he had been told expressly) but went ahead with the contract, the Principle would not be bound by it but the 3rd party can sue the agent.
Finally, if an agent is aware he shouldn’t enter into a contract, but does and the 3rd party claims he was held out as having the authority, the 3rd party can sue the principle, and the principle can also sue the agent?
Can you provide me some examples of ostensible authority, when and how it occurs? Can both an agent and 3rd party claim ostensible authority, or does it just relate to a 3rd party perspective based?
Thanks for your help
An agent acting with express or implied authority will bind the principal ( note, principal, not principle ) even though they may exceed the limits of that authority, so long as the third party was not aware of that excess.
Some people are in the position of agent and hold apparent /ostensible authority – Watteau v Fenwick. Is it within the normal limits of a bar manager’s authority that they should be able to purchase goods of a kind normally sold in bars?
Acts by an agent within their express / implied or ostensible authority DO bind the principal.
Where a person acts as though they are an agent, but they have not been officially appointed as such ( and the company DOES NOT KNOW that the person is pretending to be an agent ) the company, when they find out can refuse or accept the validity of the unauthorised “contract”. If they accept, no problem. If the reject it, the innocent third party can sue the agent, and good luck to them!
If a person without authority DOES act as an agent and the company IS AWARE that that is what they are doing, the company is tacitly accepting the agent’s authority to bind the company and the company would therefore be estopped from denying the agent’s authority.
Is that better?
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