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

Norden Ltd's secretary, Elias, has for years signed contracts to hire marketing consultants, and the board has always paid the invoices without objection. The board now wishes to deny liability on a new such contract with Vista Ltd, which dealt with Elias in good faith. What is the strongest basis on which Vista Ltd can enforce the contract against Norden Ltd?

Vista can rely on apparent authority. By repeatedly paying for contracts Elias made, the board represented that he had authority, and Vista relied on that representation in good faith. Norden is therefore bound, and Vista need not look to Elias personally.

  1. AImplied actual authority, because the secretary is always a director
  2. BApparent authority arising from the board's conduct in allowing Elias to act as if authorised and Vista relying on itCorrect
  3. CVista can only recover from Elias personally, because secretaries lack authority

Explanation

The board's repeated acceptance of Elias's contracts amounts to a representation that he has authority, and Vista relied on it. This gives apparent authority, so Norden is bound. A secretary need not be a director, and personal liability only arises in other circumstances such as lack of authority where the company is not bound.

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