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6. Dev is the company Secretary of LLL plc. He entered into a contract to rent cars for use by the sales team. However, the directors of the company objected to what they considered to be an excessive price and refused to pay.
Can the car rental company enforce the payment?
A. The car rental company will not be able to enforce the payment as the board of directors of LLL plc have refused to sanction it
B. The car rental company can successfully claim that Dev had apparent authority to enter into the contract as he showed his business card before signing it
C. The car rental company cannot enforce the contract because a company Secretary has no authority to enter into contracts on behalf of the company
D. The car rental company can enforce the contract as Dev had implied actual authority arising from his position
The correct answer is D.
Panorama Developments Ltd v Fidelis Furnishing Fabrics Ltd (1971)
Shouldn’t the answer be B? The case law says such binding power of secretary comes from apparent authority and not implied actual authority.
Good question! I think an easy way to distinguish between apparent authority and implied authority is to consider the source of that authority.
For apparent authority, this is where the directors knowingly allow an agent (here, a secretary) to act as though they had the backing of the directors. The authority is therefore derived from the directors’ actions (or inactions)
Implied authority derives from the position that the agent (secretary Dev) holds. So long as Dev’s actions lie within the scope of the range of actions typically taken by a person in that position, those actions would be acceptable under the principles of implied authority.
Does that make sense?
The case law from which this rule developed states that the authority to hire and book cars are part of the apparent authority of the secretary. This is what was mentioned in the study hub. I asked chatgpt and it said it’s not part of implied authority.
I was confused when I read this for the first time because as you rightly said and according to the study text, apparent authority applies on a person who represents himself as holding a position in the company, the directors know about this representation and have not taken steps to prevent it and the third party has noticed it and on this basis forms a contract with the person.
Whereas, implied actual authority includes the express authority of a person holding a position, any necessary act required to discharge the express authority, any past habitual conduct (directors know and have not prevented), and any authority that is usually associated with the role.
If what you have said is right, then why the judge in this case said the authority to book cars and hire staff are under the apparent authority of the secretary. They should have said implied authority.
Shekhar, I am not a happy bunny!
I too asked AI specifically about the Panorama Developments case and it concluded that the secretary’s authority was apparent / ostensible.
I then posed the question 2What is the difference between apparent and implied authority?”
Here’s the AI answer:
“Apparent Authority: This arises when a principal creates an impression to a third party that an agent has authority to act on their behalf, even if the agent does not have actual authority. It is based on the representations made by the principal, leading the third party to reasonably believe that the agent has the authority to act.
Implied Authority: This is inferred from the actions or circumstances surrounding the agent’s role. It occurs when an agent has been given express authority but is also allowed to perform acts that are customary or necessary to fulfill their duties, even if those acts are not explicitly stated.
In summary, apparent authority is about the perception of authority by third parties based on the principal’s representations, while implied authority relates to the actions that are necessary to carry out the express authority granted to the agent.”
Now can you please tell me why the Panorama secretary’s authority is not implied?
No, I’m definitely not a happy bunny!
Please do let me know your thoughts.
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