Freeman and Lockyer v Buckhurst Park Properties [1964]

Facts

  • One director of a Buckhurst, its agent, commissioned Freeman and Lockyer as architects for their Buckhurst Park Estate project
  • Buckhurst later refused to pay their invoices, saying that the director was not authorised to enter into the transaction which commissioned the architects

Issue

  • Was the company bound to pay

Decision

  • Yes

Reasoning

  • The director had acted as the managing director of Buckhurst
  • There are two types of authority, actual and apparent authority
  • The director did not have actual authority; the articles of association prohibited the director’s action, requiring all four directors to agree on such actions being taken
  • There are four pre-conditions to apparent authority: a representation made by the principal (company) to the third party (architects); authority of the principal to make that representation; inducement of the third party by the representation into a contract and capacity of the principal to enter into that contract
  • The representation was made by the appointment of the director into his position, whose office would normally provide powers of authorisation; the company had the power to appoint its own directors; the architects were induced into carrying out the work by the representation of the company that the director had authority and the company was not prohibited (by way of its articles of association) from entering into contracts such as that with the architects
  • The director therefore had apparent authority and bound the company
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Posted in Commercial Law Revision Notes.

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