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

Karel Ltd's secretary, Ms Imani, orders office furniture for the company from Oakline, a supplier, saying she is arranging it for the company's own office. The board had not specifically authorised the order. Oakline later sues Karel Ltd for the price. Which statement is most accurate?

Karel Ltd is likely bound. A company secretary has apparent authority to enter administrative contracts, such as ordering office equipment, so the supplier may enforce the contract against the company even though the board did not specifically approve this order.

  1. AKarel Ltd is not bound because a secretary has no authority to enter any contract
  2. BKarel Ltd is bound only if the shareholders ratified the order in general meeting
  3. CMs Imani is personally liable as the contract was made by her alone
  4. DKarel Ltd is likely to be bound because a secretary has apparent authority to make contracts relating to the administrative side of the business, such as ordering office equipmentCorrect

Explanation

Following the principle that a secretary is an officer with authority over administrative matters, a company is bound by contracts within that ostensible authority, such as ordering office furniture. Trading contracts would fall outside it. The first option wrongly denies any authority.

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