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ACCA Applied Skills · Corporate and Business Law (Global) · Agency law

Priya, a company director, tells Omar, a supplier, that she is authorised to buy goods on behalf of Zenith Ltd. The board had in fact given her no such power and has said nothing to Omar. Zenith Ltd later refuses to accept the contract. Which of the following is correct?

Zenith Ltd is not bound. Apparent authority must come from a representation by the principal, and an agent cannot create it by her own statement. Zenith made no representation and gave Priya no actual authority, so Omar can only claim against Priya personally.

  1. APriya had no actual or apparent authority, so Zenith Ltd is not bound by the contractCorrect
  2. BZenith Ltd is bound because Priya is a director
  3. CZenith Ltd is bound because Omar believed her statement

Explanation

Apparent authority arises only from a representation by the principal, not from the agent's own statement. Zenith Ltd made no representation to Omar, and Priya had no actual authority. Holding a directorship alone does not give power to bind the company in this way. Omar's remedy lies against Priya for breach of warranty of authority.

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