LAW OF BUSINESS ASSOCIATION
SEMESTER 1 2011
Dr Philipp Maume
19 May 2011
To determine if Glamour Developments Pty Ltd (Glamour) is liable to pay Sarah, whether or not Jane had authority to enter into such contracts on behalf of Glamour must be established. To establish the existence and type of authority an agent has in terms of acting on behalf of the principal, we must examine agency law, the indoor management rule and the statutory provisions (s 129) in the Corporations Act 2001.
Companies relies on humans to act on it’s behalf as it is an inanimate entity. As the board of directors and its officers hold positions of greater power and obligations, collectively, they are often considered as the mind and soul of the company making them the principal. In contrast, individuals, representing the company to form contracts with third parties are known as agents of the company. Third parties are often referred to as contractors.
Agency law states there are two types of authorities that an agent has; actual and apparent authority. In the case of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd  2 QB 480, Lord Justice Diplock LJ made clear, the difference between actual and apparent authority. Actual authority can be expressed or implied. Expressed authority is those given orally or in writing stating what the agent can and cannot do. Implied authorities are normally associated with the position the agent holds, it includes powers that he/she is assumed to be granted in order to successfully do their job. By having actual authority, there is a legal relationship existing between principal and agent. If the agent acted within their actual authority and enters into a contract with a contractor, this will bind the principal to the contractor. Apparent or ostensible authority is focused on the contractor’s perception. If it appears that the agent has the authority to enter...