ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Nadia, a director of Vela Ltd, regularly lets Tomas, a junior manager, place orders with Rolfe Ltd. Rolfe has always been paid. Vela then privately forbids Tomas from ordering, but does not tell Rolfe. Tomas places another order. What is the likely position?
Vela is bound. Its earlier conduct led Rolfe to believe Tomas had authority, and Rolfe relied on this without notice of the private restriction. This creates agency by estoppel, or apparent authority, so the secret limit does not protect Vela.
- AVela is not bound, because the private restriction removed Tomas's authority
- BVela is bound, as Tomas had apparent authority arising from its earlier conductCorrect
- CVela is bound only if Tomas personally guarantees the order
Explanation
Agency by estoppel or apparent authority arises when the principal represents, by words or conduct, that the agent has authority and the third party relies on it. Vela's past dealings created that representation, and Rolfe was not told of the restriction, so Vela is bound.
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