Chapter 12 Interactive flashcards of key cases

Chapter 12 Interactive flashcards of key cases

A trawler owned by a French company was at an English port when France became occupied by enemy forces during the war. The English company carried on trade by using the trawler during the war period, purporting to act as agents of the French company, although without authority from it for whom they had previously acted as managers. At the end of the war, the French company purported to ratify the English company’s activities.

The principal must themselves have been competent to perform the act at the time the agent acted on their behalf. It was held that the French company could not effectively ratify the English company’s activities during the hostilities as the French company was at that time an alien enemy. Harman J explained that ‘at the time the acts were done the French company was an alien enemy at common law. It was therefore not a competent principal because it could not have done the act itself.’

The company’s directors allowed one of their number to act as managing director but had not formally appointed him to that role. He then engaged a firm of architects to carry out some work for the company, even though he had no actual authority to do so. The company refused to pay the architect firm’s invoice, arguing that they were not bound by the agreement because the director lacked actual authority to make the contract.

It was held that the company had represented to third parties that the director had authority. This form of authority is known as apparent or ostensible authority. The company was therefore bound by the contract with the architects.

An agent, without proper authority, insured a factory on behalf of the owner (the principal). After the factory was destroyed by fire, the principal sought to ratify the insurance contract so as to take its benefit. Clearly, the owner could not have insured the factory after it had been destroyed, and, for the same reason, it was held that he could not ratify the policy.

The principal must also be competent to perform the act at the time of ratification. Hamilton J held that where a contract of insurance is made by one person on behalf of another without authority, it cannot be ratified by the party on whose behalf it was made after and with knowledge of the loss of the thing insured.

The agent purchased a consignment of wheat but did so outside the scope of his authority. He used his own name and did not disclose that he was acting as agent for a principal. The principal then decided that he would ratify the contract but later changed his mind.

Only the person on whose behalf the agent has acted may ratify. An undisclosed principal cannot ratify. The House of Lords held that a contract made by a person intending to contract on behalf of a principal, but without their authority, cannot be ratified by the ‘principal’ where the person who made the contract did not state at the time of making it to be acting on behalf of a principal.

H was the manager of F’s pub. H’s name appeared on the licence and was also painted above the door. F’s existence was concealed. F expressly prohibited H from purchasing certain goods for the pub unless F supplied them. In contravention of this prohibition, H bought from W cigars on credit terms. W thought that H was the owner. F refused to pay for the cigars, arguing that he was not bound by the contract to purchase them as he had expressly prohibited H from doing so.

F was liable for the debt, notwithstanding that he expressly prohibited H from purchasing the cigars. Wills J held that H had usual authority to make the contract: ‘the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations as between the principal and the agent put upon that authority’. This case suggests that where the ‘principal’, whose existence is concealed from the third party, restricts the usual authority of his ‘agent’, then the third party will be entitled to assume that the ‘agent’ has the authority that is usually possessed by such a person and will not be bound by the restriction placed on the ‘agent’ by the ‘principal’.

A firm of solicitors settled an action contrary to its client’s express instructions. The Court of Appeal held that the settlement agreement was binding on its client.

The solicitors were agents of their client. They clearly didn’t have express actual authority to act as they did. Solicitors would ordinarily have implied actual authority to settle a case for their client but no such authority arose in this case because of their client’s contrary express instructions. The solicitors did, however, have apparent authority and therefore the settlement agreement was binding.

Back to top