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MOD003379 Legal Aspects of Business

Question

Answered

Question:

Critically discuss this statement by referring to relevant case law in the area of agency law.

Points To Consider

  • Definition and key features of an agency relationship
  • Reference to different types of agents’ authority
  • Definition of apparent authority
  • Analysis of the essential elements of apparent authority
  • Reference to relevant case law in the area of agency law

Assessment Criteria

  • Knowledge and understanding of relevant legal principles
  • Structure
  • Analysis and application of law
  • Use of sources and academic conventions
  • Clarity of expression (grammar, spelling, punctuation)

1.There must be a representation that the agent has authority;

2.That representation must come from the principal,

3.That representation must be relied upon by the third party.

The law protects the third party (customer) by allowing him to rely on appearances which have been created or corroborated by P.

However: ‘If a person dealing with an agent knows that the agent does not have actual authority to conclude the contract or transaction in question, the person cannot rely on apparent authority.  Apparent authority can only be relied on by someone who does not know that the agent has no actual authority.  And if a person dealing with an agent knows or has reason to believe that the contract or transaction is contrary to the commercial interests of the agent’s principal, it is likely to be very difficult for the person to assert with any credibility that he believed the agent did have actual authority.  Lack of such a belief would be fatal to a claim that the agent had apparent authority.’ (Criterion Properties plc v Stratford UK Properties LLC [2004] 1 WLR 1846 (HL), 1856 (Lord Scott))

A recent case on apparent authority:

Gordon Ramsay, his father-in-law, and the signature machine

In the case of Gordon James Ramsay v Gary Love [2015] EWHC 65 the High Court has again taken a robust approach to the meaning of “signed” under English law, confirming that it extends to the use of a signature writing machine by an agent to sign a lease which included a personal guarantee on the part of the principal.

Background

Gordon Ramsay’s father-in-law, Christopher Hutcheson, had worked for Mr Ramsay and/or Mr Ramsay’s companies for approximately 20 years. Mr Ramsay had provided Mr Hutcheson with a signature writing machine (also known as a “ghost-writing machine”) to enable Mr Hutcheson to sign documents on Mr Ramsey’s behalf.  In 2008 Mr Hutcheson signed a lease for the York and Albany, a London restaurant, on behalf of Mr Ramsay’s company Gordon Ramsay Holdings International Limited.  The lease included a personal guarantee by Mr Ramsay for payment of the £640,000 annual rent.

Mr Ramsay asked the High Court to make a declaration to the effect that he was not liable under guarantee, arguing that:

  • He had not known that his signature had been added to the lease.
  • Mr Hutcheson did not have authority to sign the lease on Mr Ramsay’s behalf.

Decision

The court considered the long-standing working relationship between Mr Ramsay and Mr Hutcheson, Mr Hutcheson’s wide authority to act on Mr Ramsay’s behalf, and the fact that more than (including deeds and cheques) had been signed by Mr Hutcheson using the signature writing machine, and refused to grant Mr Ramsay the declaration.

Although the outcome of the case is perhaps not particular surprising, the following points are worth noting:

Under English law, “an instrument is validly executed as a deed if, and only if: (a) it is signed (i) by him in the presence of a witness who attests the signature or (ii) at his direction and in his presence and the presence of two witnesses who each attest the signature; and (b) it is delivered as a deed”1. The Gordon Ramsay case makes it clear that not only may a signature writing machine be used as an effective means to sign a document, but that the signature writing machine may be operated by another person.  It is likely that a similar approach would be taken by the courts in relation to the use of digital or electronic signatures.
 
It is well established law that a third party is entitled to rely on the agent’s “apparent authority” (or “ostensible authority”) in situations where the agent is held out as having authority, ie where, having regard to all the circumstances, it is reasonable for the third party to assume that the agent does have authority.  As a result, a principal should always ensure that its agents and representatives are aware of the extent of their authority, particularly with respect to signing contracts; although this will not stop a third party being entitled to rely on the agent’s apparent authority, the principal will at least have a claim against the agent for exceeding their authority.  And if you are authorising an agent to deal with a third party, you should notify the third party in writing of the limits of their authority, in particular whether the agent is authorised to enter into any contractual commitments on your behalf and, if so, what monetary and/or other limits apply.

MOD003379 Legal Aspects of Business

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