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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Calder Ltd's board privately resolved that its secretary, Pavel, must not sign any contract for the hire of vehicles. Pavel nevertheless signs an agreement with Swift Hire to rent cars for visiting customers. Swift Hire knew nothing of the board's restriction. Pavel's apparent authority covers hiring cars for customer visits. Which is correct?

Calder is bound. Hiring cars for customer visits falls within the secretary's apparent authority, and an undisclosed internal restriction does not bind a third party who has no notice of it. Calder's remedy lies against Pavel, not against Swift Hire.

  1. ACalder is bound, because Swift Hire can rely on Pavel's apparent authority and had no notice of the private restrictionCorrect
  2. BCalder is not bound, because any internal board restriction on the secretary defeats the third party's claim
  3. CCalder is bound only if Pavel was also a member of the company holding voting shares

Explanation

Apparent authority arises from the company's representation, here the appointment as secretary, and a third party acting in good faith without notice of an undisclosed restriction can enforce the contract. The private board resolution does not affect Swift Hire. Pavel's share ownership is irrelevant. Calder may have a claim against Pavel for breach of duty.

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