Previous: Introduction to agency

When a principal agrees that an agent will act on his behalf, that principal confers authority on the agent. There are two type of authority: actual authority and apparent authority. Authority describes the extent to which an agent can bind his principal with contracts entered into on his principal’s behalf.

Actual authority

Actual authority, in the words of Lord Diplock in Freeman and Lockyer v Buckhurst Park Properties [1964], is a legal and consensual relationship between agent and principal which starts with the interpretation of that agreement. Actual authority is therefore the authority that a principal intends to surrender to his agent. If an agent concludes a contract within the scope of his actual authority, the principal (and the third party) is bound by that contract.

Express actual authority

Express actual authority is the extend of the authority that an agent has from the interpretation of his agency agreement. Ireland v Livingston (1872) allows an agent to act reasonably in interpreting ambiguity within his agreement, but this may have been modified where it is possible that due to developments in technology, the agent could have asked for clarification. In European Asian Bank v Punjab Sind Bank (No. 2) [1983], it was again confirmed that ambiguity, where practical, should be clarified.

Implied actual authority

According to Howard v Baillie (1796), an agent has actual authority to do all acts ‘in order to attain the accomplishment of the object of principal power’...

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