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Company Contracts Cases

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Company Law Supervision IV - Cases COMPANY CONTRACTS Actual Authority Implied Authority Hely-Hutchinson v Brayhead Ltd [1968]
Richards, a director and chairman of defendant company, was accustomed to entering into various contracts on D's behalf and only informing other directors subsequently. C was managing director of a company with whom Richards had contracted. When C sued D under contract, D alleged Richards had no authority to enter contract in question on behalf of D. Held: Lord Denning MR Implied Authority

1. Authority is may be express or implied

2. Authority is implied where it is inferred from conduct of parties and circumstances of case

1. e.g. X is managing director

1. X has implied authority to do anything

2. e.g. X is sales director

1. has implied authority to enter contracts of sale Ostensible Authority

1. Ostensible authority often coincides with actual authority

1. E.g. where X is appointed managing director, also has ostensible authority to do anything usually falling under powers of a managing director

2. Thus here, even if X is expressly restricted from entering contracts of more than
PS1,000, will have ostensible authority to enter contracts of greater value Facts

1. Richards had implied authority to enter into contract from circumstances of case

1. Richards did not have implied authority from nature of office

2. i.e. is nothing special about position of chairman entitling him to enter any contract without board approval b. However did have implied authority from the acquiescence of board in his practice of entering contracts on behalf of company over period of many months Harold Holdsworth [1955]
X was appointed managing director of a company; under terms of appointment was stated that X would carry exercise the powers of the company as would be from time to time vested in him by board of directors. Board decided to make X concentrate exclusively on a

subsidiary company; X stated that this was repudiation of contract of employment as it was inconsistent with his role as managing director. Held:

1. Terms of appointment made it clear that X, as managing director, only had so much power as board might vest in him.

2. Thus board's later decision was not breach of this agreement. Panorama Developments [1971]
X was a Secretary of a company. He hired cars, claiming they were for use by company's employees in their business; however he fraudulently used them for his own purposes. Held:

1. Company secretary has implied authority to bind company in relation to administrative matters

2. Thus X had ostensible authority to enter into hire contracts.

3. Thus company liable. Improper Purposes/Bad Faith Hopkins v TL Dallas Group [2004]
Director signed letters of undertaking on behalf of his company to pay PS1 million to company B. He did so fraudulently for his own benefit. Company B attempted to get payment from director's company. Held:

1. Director does not have actual authority where he acts for: i) Improper purposes ii) Or in bad faith

2. Thus where director acts contrary to interests of his company, does not have actual authority.

3. This may be case where e.g. director signs contracts which are very onerous and disadvantageous for his company Facts

1. Director did not have actual authority to sign letters.

1. Did not fall within scope of his implied authority as director

2. He acted in breach of fiduciary duty when doing so

4. In addition, Company B could not rely on ostensible authority

1. very facts which amounted to breach of directors' duty put Company B on notice of lack of authority

2. i.e. transaction were so disadvantageous to director's own company that Company B should have known director was acting in breach of duty

1. or at the least, should have asked the other directors to confirm validity of transaction

3. thus party cannot rely on ostensible authority where he is on notice of lack of authority

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