X and Y had formed defendant company, for purpose of selling some land. X, Y and a nominee of both were appointed directors; under articles, all 4 were needed to constitute a quorum. X spent most of his time abroad, whilst Y undertook day-to-day management of company. Y decided to develop the land, and engaged C, a firm of architects, to apply for planning permission. Company later refused to pay C on grounds that C had no authority to engage them. Held:
Diplock LJ
· Is ostensible authority where:
1) Representation was made to T that agent had authority to enter on behalf of the company into contract of the kind sought to be enforced
2) Representation was made by a person who had actual authority to manage business of company, either generally or in respect of matter to which the contract relates
3) T was induced by the representation to enter into the contract
- i.e. T relied upon it
4) there were no restrictions in articles of company depriving it of capacity to enter into such a contract
Representation
· This usually done via conduct
Ø e.g. board of directors appointing Y to a position in which he is permitted to act in management or conduct of company’s business
Ø here, Y has ostensible authority to enter into contracts which someone in that position would usually be able to enter in course of his duties
Facts
· Y had ostensible authority to employ C.
1. Board acquiesced to Y acting as managing director in process of finding purchaser for land
– thus represented he had actual authority to enter into contracts of sort which he entered with C (condition 1)
2. Articles of association gave board full powers of management (condition 2)
3. C entered into contract on basis of representation (condition 3)
4. Articles of association did not deprive company of capacity to delegate authority to C (condition 4)
