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

Quill Ltd's board lets Rex act openly as its purchasing manager for years, ordering supplies of all sizes. Rex is then told privately not to place orders above 20,000. He orders 30,000 of supplies from Burne Co, which had dealt with him before and knew nothing of the limit. Which is the correct legal position?

Quill Ltd is bound. By letting Rex act openly as purchasing manager it represented that he had authority, and Burne Co relied on this without knowing of the private 20,000 limit, so apparent authority applies and no duty to enquire arose.

  1. AQuill Ltd is not bound because the limit was a contractual instruction
  2. BQuill Ltd is bound because Rex had apparent authority and Burne Co had no notice of the limitCorrect
  3. CRex alone is bound because he exceeded his instructions
  4. DQuill Ltd is bound only if Burne Co first confirms the limit with the board

Explanation

Quill Ltd represented Rex as purchasing manager by allowing him to act openly in that role. A private restriction does not defeat apparent authority where the third party lacks notice. Burne Co has no duty to enquire absent suspicious circumstances, so the last option is wrong.

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