ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers
Brightwave Corp's secretary, Tomas, without any board approval, signs a contract with Kelso Ltd to buy a fleet of delivery lorries for the company's new distribution business. Kelso did not know of any restriction on Tomas. Which statement is most likely correct?
The company is probably not bound. A secretary's ostensible authority extends to administrative contracts, not major commercial purchases such as a lorry fleet for a new business. Without board authority or holding out by the board, Kelso cannot rely on apparent authority.
- AThe company is bound because every secretary has authority over all contracts
- BThe company is not bound by ostensible authority, because buying lorries for a trading venture is outside the secretary's administrative roleCorrect
- CThe contract is binding on Tomas only, because a secretary can never act as an agent
Explanation
A secretary's ostensible authority covers administrative matters, not core trading decisions. Purchasing a fleet for a new business is a commercial matter requiring board authority. Unless the board held him out as having wider authority, the company is not bound by apparent authority.
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