The Introductory Fee To Computer Services Ltd Law Commercial Essay

Published Date: 02 Nov 2017

Mr. Swift can only act to alter Compusolutions’ legal position if he has the authority to do so. There are two main types of authorities: actual authority and apparent or ostensible authority. Actual can either be expressed or implied. In SMC Electronic Ltd v Akhter Computers Ltd, [2] where it was held that B possesses authority to enter into the commission agreement with the result that A was bound by that agreement since he had actual authority to make the deal. Actual authority is a legal relationship between principal (Compusolutions) and the agent (Mr. Swift) created by consensual agreement to which they are parties, Freeman & Lockyer v Buckhurst [3] , whereby it was held that although the Mr. Kapoor had never been appointed as managing director, he had acted in the capacity of managing director with the knowledge of the directors. Thus it can be said that Mr. Swift has been acting as ‘Director Sales Promotion’ with the knowledge and consensual agreement of Compusolutions as although he was not appointed as a company director "he was given the titles and the business cards printed as ‘Director Sales Promotions’". However, this cannot amount to express actual authority as although Mr. Swift was given the business cards, there has never been an agreement taking place orally or in writing that Mr. Swift will have authority to act for Compusolutions.

As for implied authority, Mr. Swift can only have actual implied authority for Compusolutions if the latter and Mr. Swift agreed otherwise in words that he should have such authority. Implied authority aroused by Compusolutions and Mr. Swift’s relationship with each other from their conduct or circumstances. In Hely-Hutchinson v Brayhead [4] , the directors of a company allowed the chairman to act as if he was managing director of the company. In fact the chairman had never been appointed as one, so, he had no express authority to bind the company. The chairman made a contract with a third party on the company’s behalf. It was held that the chairman had implied authority to bind the company and so the company was bound by the contract made by the chairman that he should have the same authority as if he has actually been appointed as managing director. So, it can be said that Compusolutions might be bound as by giving Mr. Swift the business card, Compusolutions has impliedly agreed that Mr. Swift had such authority.

Moreover, the difference between these two types of authority was explained by Lord Denning in the above case [5] in those terms:

"… actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques. It implied when it is inferred from the conduct of the parties and the circumstances of the case such as when the board of directors appoint one of their number to be managing director."

A very clear distinction has been made between the two types of actual authority. Lord Denning, in simpler terms, meant that for an actual authority to be express it has to be put in words while an implied actual authority is when it is inferred by conduct of the principal and the circumstances.

Another type of actual authority is usual authority. This type of authority can either be used for a particular type of implied actual authority or apparent authority. In the case of Watteau v Fenwick [6] , a pub owner let a manager (agent) run a pub. The owner authorised the manager to buy only bottled drinks and expressly forbade him to buy tobacco on credit. He acted beyond those instructions and bought the cigars on credit. When the manager could not pay the cigars, the seller sued the owner and the latter was held liable as the held manager was held to have usual authority as "the agent was clothed with all the authority which one would usually expect an agent of this type to have." [7] So, it can be said that it is less probable that Mr. Swift will be personally liable as he has always acted as director and signing contracts and negotiating is usually what one expects from a director but it was also held that a defendant cannot go against Principal to set up any secret limitation of that authority. Thus, it may be ventured out that that Mr. Swift had gone against Compusolutions while making the agreement with Mr. Bloggs, and hence it can be said that Mr. Swift had no such authority.

However, actual authority can never go against a limitation expressly established. In the case of Waugh v HB Clifford [8] the court of appeal recognised that generally solicitors employed to defent proceedings would have implied actual authority to enter into a compromise. However, this could not be the case when they have been expressly ordered not to do this. Terms implied by the court, on the basis that they have been expressed, were obviously what the parties intended can always be excluded by an express term. In our case, there was no such express limitation imposed on Mr. Swift. In fact, he "enjoyed a high degree of freedom with minimum supervision".

Usual authority can be apparent as well in the sense that if an agent is appointed in a position he would usually have authority to do certain acts, for example, Mr. Swift having authority to sign contracts and dealing with clients as director then he can be said to have apparent authority. Apparent authority does not arise from any agreement between the principal and agent but rather on account of the principal having made a representation to a third party (Computer Services Ltd) and the agent has authority to act on his behalf.