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1. |
Actual authority |
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| a. |
Actual authority includes express authority and implied authority (not to be confused with implied appointment, that is, appointment by estoppel).
Express authority is the authority which the principal has expressly given to the agent whether orally or in writing.
Implied authority (sometimes described as usual authority) is the authority of an agent to do acts which are reasonably incidental to and necessary for the effective performance of his duties. The content of implied authority depends on the facts of each case and is sometimes determined by the usages and customs of a trade, business or profession.
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| b. |
The scope of the actual authority of the agent is therefore to be ascertained from the oral or written agreement between principal and agent, usage and customs of the relevant trade, profession or business and the course of dealing between the two parties. |
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| c. |
If the agent enters into a contract with a third party pursuant to his actual authority, the contract entered into will create contractual rights and liabilities between the principal and the third party. |
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2. |
Apparent or ostensible authority |
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| a. |
An agent is said to have apparent or ostensible (not actual) authority if: |
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| i. |
The principal has made a representation (whether by words or conduct) to the third party to the effect that the agent has the authority to act for him although the agent does not in fact have such authority; |
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| ii. |
The third party has in fact relied on such representation to deal with the agent; and |
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| iii. |
The third party has altered his position resulting from such reliance, for example, assuming obligations under a contract with the agent. |
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| b. |
In essence, apparent or ostensible authority is authority which the principal induces a third party to believe the agent has when the agent in fact has not. The agent has only the appearance of authority, but no actual authority to act on behalf of the principal. Nevertheless, if the third party enters into a contract with the agent in reliance on the principal's representation, that contract will still be legally binding on the principal. |
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| c. |
Apparent or ostensible authority will give rise to agency by estoppel (discussed in section 3(2) above). The principal's representation to the third party as to the authority of the agent to act on his behalf, when acted upon by that third party by entering into a contract with the agent, operates as an estoppel which prevents the principal from denying that such contract is binding upon him. |
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