The authority of the agent 161pockets money paid by a customer, rather than putting it into the till, this is not the concern
of the customer. Having paid the price in good faith to the shop assistant, the customer is
regarded as having paid the price to the shop owner.
Control of the company
An agent cannot act on behalf of a principal unless he has some authority to do so. There
are different types of authority, which arise in different ways. It is important to know which
type of authority an agent has, because the different types have different effects.
Actual authority
The most important type of authority is called actual authority. Actual authority arises
because the principal agrees with the agent that the agent should have the authority. The
principal might agree this using express words, in which case the authority is known as
express actual authority. Or the principal might agree it impliedly, without express words,
in which case it is known as implied actual authority. When an agent is appointed to a
certain position then the principal will have impliedly agreed with him that he should do
what a person holding that position would usually do. It is important to remember that
both types of actual authority arise because the principal has agreed that the agent should
have the authority.
Example
In Hely-HutchinsonvBrayhead Ltd (1968)Lord Denning MR gave an example of a board
of directors of a company passing a resolution authorising two directors to sign cheques.
These two directors had been given express actual authority to sign cheques. The example
also said that if the board of directors appointed one of the directors to the post of manag-
ing director then they conferred on that director implied actual authority to do what the
managing director of such a company would usually do.Apparent authority
Apparent authority arises in a completely different way. It arises because the principal
represents to a third party that the agent has authority. Once the third party has acted on
Hely-Hutchinson vBrayhead Ltd (1968) (Court of Appeal)The board of directors of a company allowed the company chairman to act as if he were
the managing director of the company. In fact, the chairman had never been appointed
managing director and so had no express authority to bind the company. The chairman
made a contract with a third party on the company’s behalf.
HeldThe chairman had implied actual authority to bind the company and so the company
was bound by the contract which the chairman had made. The company, by its conduct,
had impliedly agreed with the chairman that he should have the same authority as if he had
actually been appointed managing director.