Differences Between Actual And Apparent Authority Under Law Of Agency

By referring to relevant case law, critically discuss the main differences between actual and apparent authority under the law of agency.

• Definition and key features of an agency relationship
• Different types of agents’ authority
• Relevant case law in the area of agency law

Actual Authority

In the law of Agency the Agent has some authority which is distributed in the form of actual and apparent authority under the law of agency. In this report differences between the actual and apparent authority under the law of agency has been described by undertaking various laws and cases.

In the terms of Actual Authority, it can be in the way of express or implied authority. In the express form the principal has to explain to the agent in a very precise and proper way that what an agent has to do in the position of being an Agent. It is analysed that power of attorney could be the example of given express authority.  The construction of words which are used in the documents can be worked out for the scope of express authority. In this case, third party gets the knowledge about the limitation of the authority of the agent or diseovered the related examination, he will be bound by it. An agent cannot borrow from anybody on behalf of his principal unless he is authorised to do so. However, an agent could have authority to do all the works on the behalf of his principle on the basis of shared documents and details.

In the case of Withington v. Herring (1 the829) 5 Bing. 442: 130 E.R. 1132, it was held that the agent could borrow capital form market. Here the fact is that he borrowed beyond the authorised limit. However, it does not prevent party to from the holding the principle’s liability. In the case of Hambro v Burnand 1904 2 KB 10 CA 33 Watteau v Fenwick 1893 1 QB 346 QBD), it was held in this case that if the agent has acted with an improper motive does not take case beyond the scope of authority. If in case, agent does anything beyond his authority then he would be liable for that particular task.  Therefore, it was concluded that if agent wants to undertake particular task then he should be liable for that task if taken beyond the given authority.

In the case of Attwood v Munnings (1827) 7 B and C 278; 108 ER 727, in this case, it was held that principal was going to abroad while he was authorising the agent and at the same time his partner will carry his business. In addition to this, his wife would accept the bills on the behalf of his business. For which the agent was authorised and which was completely different from the undertaken personal business (Braunschweig, 2019).

In the Case of Reid v Rigby and Co [1894] 2 Q.B. 40, QBD, In this case the agent has obtained loan outside his authority by signing cheque for his principle then he will be liable for the same personally. He would pay workmen of principal, here the principal was held bound (Ernes, 2017).  In the implied form of authority which can also be termed as incidental authority states that it occurs when it is impossible or impracticable to fully specify the authority and duties of an agent. The Actual Authority comes when the principal (if exist) express his statement to determine the authority of the agent. The principal expresses his standards or usages of the trade, the nature of the agency agreement and other terms and conditions to his agent. Most of the agreements which are implied in nature gives the authority to the agent to perform such kind of duties which are customarily undertaken. The agent does his duty which is reasonably necessary to conduct the business of the agent (Rainey, 2017). The duties which are authorised to an agent cannot be implied that can conflict with the express statement of the principal which is intended to limit the authority of the agent. The implied authority can be partially be determined by whether the agent is employed to provide a service for a continuous terms which includes a series of transactions as in general agent or a single transaction as in for a special agent. When the authority is inferred from the circumstances of the case it is said to be the implied authority. The main difference between express of implied authority depends upon the circumstances of the case whether the authority is delimited by the conduct or words (Cassim, and Cassim, 2017). This case has shown the implied authority which depends upon the circumstances of the cases and authority undertaken in the agreement. Agent can do other acts but that for all the acts agent he would be liable.

Implied Authority

In the case of Eva Weaver v. Priscilla Deverell, W2011-00563-COA-R3-CV (Tenn. Ct. App. 2011), it was given that Percy holmes entered into contract to purchase  life insurance policy for $25,000 in this he named his partner Eva Weaver as the primary beneficiary. Weaver paid premiums for over 20 years. In 2009, Holmes designated his daughter Priscilla Deverell his power of attorney. After that, beneficiary was changed from Eva to herself. Percy dies in 2010, after that both the women entered into the contract for the benefits given in the policy. After that Weaver filed compliant Weaver that Priscilla has committed fraud by changing the name of beneficiary. The court ruled in favour of Weaver (Reid, and Filby, 2018). It is found that the main difference between express of implied authority depends upon the circumstances of the case whether the authority is delimited by the conduct or words. However, implied contracts are always covered in the apparent contract.

This authority is also known as ostensible authority. It often appears to be the authority of an agent to others. This case was often confides with the available actual rights. The term ostensible authority denoted ‘no authority’ at all. It is conventionally used phrase which reveals the situation when one person clothed another to assume to have the power of appearance authority. In this way the third party is misled into believing that the real authority exists. The Apparent authority is described as the behaviour of the principal which is interpreted by the third party to lead him to reasonably believe that the agent is authorised by the principal to act in the agency (Tettenborn, 2018).  In this way it can be termed as the agent has the Apparent Authority. This kind of authority is manifested in the apparent consent as it is viewed by the third party of the principal to the agent’s action. In this kind of authority the communication between the agent and principal is irrelevant to determine the existence of an agency relationship. In the exceptional cases where the communication is known to the third party or it affects the behaviour of the agent as it is seen by the third party. The direct statements given to the third party by the principal or the other trade or business practices can establish an apparent authority. The agent himself cannot make an apparent authority but he can endeavour to create the apparent authority. If however the agent has expressed to the agent to exercise his authority which is limited in nature and the permission is known by the third party then also it can create the apparent authority. The apparent authority has the potential to make a binding relation between the principal and the third to the contracts even though the principal did not appoint the agent with the authority and power to form contracts. Thus it could be inferred that board of directors or BOD appoints one of their directors to be the managing director of company. They invest on him not only the implied authority but also with the ostensible authority to do all such acts which fall within the usual scope of that office (Clarke, et al. 2017). The apparent authority would be based on the own due diligence and should be undertaken by the agents effectively.

Apparent Authority

In the case of PICKERING v. BUSK, 1812, 15 EAST 38.  This case portrays the truth of Lord Ellenborough’s observation which states that the apparent authority is real authority.

In the case of Egyptian International Foreign Trade Company v. Soplex Wholesale Supplies Limited ( The Raffaella ), (1985) 2 Lloyd’s Report 36. It was held that the doctrine of apparent authority is the application of the principal of estoppel which means that the person is not permitted to resist an inference which reasonably be drawn from the conduct or words of the principal.

According to the Anson Law of Contract Page 671 (28^th Edition), it says that the person who is indulged in making the representation is based on the estoople from the denying ostensible right. It was done with a view to create a contract of agency (Merkin, and Devenney, 2018). In the case of Attorney general for Ceylon v. Silva (1953) A.C. 461. It was held that the ostensible authority is not created by the simple representation of the agent. The representation must be made by or with the authority of the principal. If the representation made by or without the authority of the principal then agent himself would be liable for the act done by him.  In the case of Farquharson Brothers v. King and Company (1902) A.C. 325. It was held that all the third party of the agency must rely on the representation of authority of agent to act or work as agent. In the case of Armagas Ltd v Mundogas SA [1986] 1 AC 717, it was held that the want of agent’s authority must be unknown to the third party (Han, 2018). However, if in case, third party going to enter into the contract with the agent then he has right to know the specific person who has the whole sole authority.

In the apparent authority the statutory provision states that if the agent has acted or incurred some obligation to third party without authority on behalf of the principal then in this case the principal is bound by the acts and obligations of the agent if he has induced the third party to believe that such obligations or acts were in the scope of the authority of the agent. In the words of Willis J it was held that when once it is established that the real principal was the defendant, in this case the ordinary doctrine of principal and agent applied that the principal is liable for the acts and work which falls under the prinicople and agent usual authority. It is confined to the agent notwithstanding limitations put upon the principal and agent (DeMott, 2017)

1. Actual authority could be defined as principle specially informs the third party that agent will be acting or working on the behalf of the principle. It is included as real estate agent a stock broker, an insurance agent and partnership (Gustavsson, Karlsson, and Persson, 2017).

Apparent authority is that where a third party believes that by the conduct of the agent and principal the agent has the authority of the principal to bind the principal. This applies in employment sceneries, joint ventures and marital scenarios. Estoppal is applied to this authority (Von Bogdandy, Goldmann, and Venzke, 2017). This has shown how actual and apparent authority could be used by the agents to discharge his authority given by principles to do work on his behalf. However, the undertaken work should be done on the basis of apparent and

2. The Actual Authority is done when principle directly say to agent through the written agreement to work on his behalf. It is authority which enters into a contract for a state or municipal entity which is usually spelled out by the charter, statute and ordinance.

Cases related to Actual and Apparent Authority

On the other side Apparent Authority is given and it does not need specific power to be given to agent. Nonetheless, if any action is taken then it is not necessary that action would be legal and binding on the principle under apparent authority. This develops where a third party has developed a reliance on the agent which results in tangible business outcomes.

3. Actual Authority covers express and implied authority which is given by principle to agent. It includes the acts of the agent necessary to perform the duty (Neriya-Ben Shahar, 2017).

In Apparent authority the principal made representation to the third party to the effect that the agent has authority to act on his behalf although the agent does not such authority. The third has representation to deal with the agent.

4. The scope of the actual and apparent authority is defined by the agreement undertaken between the principle and agent. The customs and usages of the trade or business and the course of dealing between both of them (Kerwin, and Furlong, 2018).

In the apparent authority, gives rise to the agency by the estoppel, this operates as an estoppel which reduce the chances of ambiguity (Cosens, et al. 2017).

5. The contract made by the agent with the third party in the actual authority, it will create contractual liabilities and rights between the third party and the principal. This authority apparently apples to contractors generally in this was held in the case of Peter Bauwens Bauunternehmung GmbHand Co., ASBCA 44679, 98-1 BCA 

Here in the apparent authority the agent has only appearance of authority but no actual authority by which he can act on behalf of the principal. But if the third party enters into the contract with the agent in reliance on the representation of principal. This kind of contract will still be legally binding on the principal (Roness, 2017).

6. The standard objective to know the difference between the actual or apparent authority is by the conduct of the principal which will state if the principal has made reasonable belief that if the third party was authorised by the principal in the manner relied on. The conduct of the principle shows whether the agent has authority to do on the behalf of the principle or not.

Conclusion:

The crux of this report is that both actual and apparent authority is required when agent wants to work on the behalf of the principle and any acts done by the agent on the behalf of the principle will be taken as liability of the principle.

References:

Armagas Ltd v Mundogas SA [1986] 1 AC 717 

Braunschweig, C. (2019). Investitionsrechnung: Einführung mit einer Darstellung der Unternehmensbewertung. Walter de Gruyter GmbH and Co KG.

Cassim, F. H., and Cassim, M. F. (2017). The authority of company representatives and the Turquand rule revisited. South African Law Journal, 134(3), 639-664.

Clarke, M. A., Hooley, R. J. A., Munday, R. J., Sealy, L. S., Tettenborn, A. M., and Turner, P. G. (2017). Commercial Law: Text, Cases, and Materials. Oxford University Press.

Cosens, B. A., Craig, R. K., Hirsch, S. L., Arnold, C. A. T., Benson, M. H., DeCaro, D. A., ... and Schlager, E. (2017). The role of law in adaptive governance. Ecology and society: a journal of integrative science for resilience and sustainability, 22(1), 1.

DeMott, D. A. (2017). Corporate Officers as Agents. Wash. and Lee L. Rev., 74, 847.

Ernes, A. (2017). Kelly v. Fraser compared to the Allocation of Risk in Agency Law in the Netherlands. European Journal of Commercial Contract Law, 9(3), 101-106.

Eva Weaver v. Priscilla Deverell, W2011-00563-COA-R3-CV (Tenn. Ct. App. 2011)

Gustavsson, S., Karlsson, C., and Persson, T. (2017). Examining the illusion of accountability.

Hambro v Burnand 1904 2 KB 10 CA 33 Watteau v Fenwick 1893 1 QB 346 QBD

Han, W. (2018). On If an Insurance Policy Is a Perfect Contract of Indemnity in Marine Insurance. China Legal Sci., 6, 77.

Kerwin, C. M., and Furlong, S. R. (2018). Rulemaking: How government agencies write law and make policy. Cq Press.

Merkin, R., and Devenney, J. (2018). David Capper 7.1 Introduction. In Essays in Memory of Professor Jill Poole (pp. 138-152). Informa Law from Routledge.

Neriya-Ben Shahar, R. (2017). Negotiating agency: Amish and ultra-Orthodox women’s responses to the Internet. new media and society, 19(1), 81-95.

Peter Bauwens Bauunternehmung GmbH and Co., ASBCA 44679, 98-1 BCA 

PICKERING v. BUSK, 1812, 15 EAST 38

Rainey, S. (2017). The law of tug and tow and offshore contracts. Informa Law from Routledge.

Reid v Rigby and Co [1894] 2 Q.B. 40, QBD

Reid, W., and Filby, J. (2018). The Sixth: an essay in education and democracy. Routledge.Pettifer, E. W. (2018). Punishments of former days. Read Books Ltd.

Roness, P. G. (2017). Types of state organizations: Arguments, doctrines and changes beyond new public management. In Transcending new public management (pp. 77-100). Routledge.

Tettenborn, A. (2018). TRANSFER OF CHATTELS BY NON-OWNERS: STILL AN OPEN PROBLEM. The Cambridge Law Journal, 77(1), 151-178.

Von Bogdandy, A., Goldmann, M., and Venzke, I. (2017). From public international to international public law: Translating world public opinion into international public authority. European Journal of International Law, 28(1), 115-145.

Withington v. Herring (1829) 5 Bing. 442 : 130 E.R. 1132