Express or Implied Authority
A company may form binding contracts with another company through individuals (agents) that are capable of acting for a company under General and Statutory Law. That is, the principles of the law of agency are applied to the agent to determine the binding nature of the contract.
All references to sections are sections of the Corporations Act 2001 (Cth), unless indicated otherwise.
Agency & Principal Relationship
The agent represents the principal (company) by acting for a company to enter a contract. In this context, Terry, the agent of [the principal] Lotza Money Limited (LML) offers [the outsider] Marble Arch Limited (MAL) a contract under specific terms.
It is crucial to determine the extent of Terry’s authority in enforcing a contract to be binding to another party.
Actual Authority
Express Authority
‘An actual authority is a legal relationship between principal and agent created by consensual agreement’ (Lord Diplock). The express grant written in clear terms states Terry is “authorised to enter contracts on LML’s behalf, up to a monetary limit of $500,000”.
However, the fact that Terry devises a new contract for a price of $1,400,000 means he no longer has express authority as an agent to make this contract binding with MAL. It should be noted, Terry only holds express authority up to amounts of $500,000.
Implied Authority
If an authority is not expressly agreed upon, it can be implied from the conduct of parties and circumstances (Lipton, Herzburg and Welsh 2012). That is, the authority is implied to exist from the agent’s position. Implied authority may arise by ‘proper appointment or conferment to a position of [managing director, company secretary or a single director’ (National Australia Bank Ltd v Sparrow Green Pty Ltd 1999 [1999] SASC 280).
However, the scope of the law of agency does not extend to the position of senior managers as it is ultra vires. Hence, Terry does not possess implied authority to make a contract binding.
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All references to sections are sections of the Corporations Act 2001 (Cth), unless indicated otherwise.
Agency & Principal Relationship
The agent represents the principal (company) by acting for a company to enter a contract. In this context, Terry, the agent of [the principal] Lotza Money Limited (LML) offers [the outsider] Marble Arch Limited (MAL) a contract under specific terms.
It is crucial to determine the extent of Terry’s authority in enforcing a contract to be binding to another party.
Actual Authority
Express Authority
‘An actual authority is a legal relationship between principal and agent created by consensual agreement’ (Lord Diplock). The express grant written in clear terms states Terry is “authorised to enter contracts on LML’s behalf, up to a monetary limit of $500,000”.
However, the fact that Terry devises a new contract for a price of $1,400,000 means he no longer has express authority as an agent to make this contract binding with MAL. It should be noted, Terry only holds express authority up to amounts of $500,000.
Implied Authority
If an authority is not expressly agreed upon, it can be implied from the conduct of parties and circumstances (Lipton, Herzburg and Welsh 2012). That is, the authority is implied to exist from the agent’s position. Implied authority may arise by ‘proper appointment or conferment to a position of [managing director, company secretary or a single director’ (National Australia Bank Ltd v Sparrow Green Pty Ltd 1999 [1999] SASC 280).
However, the scope of the law of agency does not extend to the position of senior managers as it is ultra vires. Hence, Terry does not possess implied authority to make a contract binding.
On