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Watteau v Fenwick (1893)
Facts: The new owners of a hotel continued to employ the original owner
as the manager. In the agency agreement the new owners ordered
the agent not to buy certain items, including cigars. The manager
still bought cigars from a third party. The owners then refused to pay
for the cigars.
Held: The purchase of the cigars was within the usual authority of a
manager of a hotel. The contract was binding on the owners. (If a
limitation on the usual authority is going to be effective, it must be
communicated to the third party before any contract is made.)Why is the contract binding on the owners despite the fact that they had refused the manager to buy cigars?
Because the cigar seller couldn’t have known of the restriction of authority.
If there is going to be some limitation on the extent of the agent’s acceptable activities (and normal activities in the case of a hotel manager) then, to be effective, it needs to be communicated to the cigar seller – maybe some sign behind the bar saying “This manager is not authorised to buy tobacco products”
OK?
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