Part D The formation and constitution of business organisations 10: Agency law 1613.1 Express authority
Express authority is a matter between principal and agent. This is authority explicitly given by the principal
to the agent to perform particular tasks, along with the powers necessary to perform those tasks.
The extent of the agent's express authority will depend on the construction of the words used on their
appointment. If the appointment is in writing, then the document will need to be examined. If it is oral,
then the scope of the agent's authority will be a matter of evidence. If the agent contracts outside the
scope of their express (actual) authority, they may be liable to the principal and the third party for breach
of warrant of authority.Illustration^
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A board of directors may give an individual direct express authority to enter the company into a specific
contract. The company would be bound to this contract, but not to one made by the individual director
outside the express authority.
3.2 Implied authority
Where there is no express authority, authority may be implied from the nature of the agent's activities or
from what is usual or customary in the circumstances. Between principal and agent the latter's express
authority is paramount. The agent cannot contravene the principal's express instructions by claiming that
they had implied authority for acting in the way they did. As far as third parties are concerned, they are
entitled to assume that the agent has implied usual authority unless they know to the contrary.
Watteau v Fenwick 1893
The facts: The owner of a hotel (F) employed the previous owner (H) to manage it. F forbade H to buy
cigars on credit but H did buy cigars from W. W sued F for payment but F argued that he was not bound
by the contract, since H had no actual authority to make it, and that W believed that H still owned the
hotel.
Decision: It was within the usual authority of a manager of a hotel to buy cigars on credit and F was bound
by the contract (although W did not even know that H was the agent of F) since his restriction of usual
authority had not been communicated.
Hely-Hutchinson v Brayhead Ltd 1968
The facts: The chairman and chief executive of a company acted as its de facto managing director, but he
had never been formally appointed to that position. Nevertheless, he purported to bind the company to a
particular transaction. When the other party to the agreement sought to enforce it, the company claimed
that the chairman had no authority to bind it.
Decision: Although the director derived no authority from his position as chairman of the board, he did
acquire authority from his position as chief executive. Therefore the company was bound by the contract
as it was within the implied authority of a person holding such a position.
Illustration^
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A principal employs a stockbroker to sell shares. It is an implied term of the arrangement between them
that the broker shall have actual authority to do what is usual in practice for a broker selling shares for a
client. Any person dealing with the broker is entitled to assume (unless informed to the contrary) that the
broker has the usual authority of a broker acting for a client.