Company agent authority - actual or ostensible?

• Published date: 08 April 2022
• Law Firm: Bartier Perry
• Author: Mr Gavin Stuart, Emma Boyce and Gabriella Porcu

Given the nature of companies, it is common for them to enter into contracts with third parties by way of an agent. This article explores some of the legal protections for third parties that enter into a contract with a company through its agent and arguments available to a company seeking to disclaim an agreement in those circumstances. In particular, we examine the concept of ostensible authority and how a company can be bound by the acts of its agent when the scope of the agent's authority may be questioned.

Defining the company agency relationship

The case of International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) stated that the agency relationship in the context of a company is a relationship "involving authority or capacity in one person to create or affect legal relations between another person or company and third parties".

The company agency relationship may arise by:

• Operation of law
• Agreement between the company and the agent, either by express agreement or implication (Slater v Strawberry John Pty Ltd [2002] WASC 204).
• The company's ratification of actions performed by the agent (Australian Blue Metal Ltd v Hughes [1962] NSWR 904). For ratification to be effective the following conditions must be met
  • the agent must be acting on behalf of the company
  • the company existed at the time of the unauthorised action
  • the company had contractual capacity at the date of ratification
  • the company has full knowledge of the details of the transaction;
  • the company ratifies the entire contract.
• Estoppel under the doctrine of apparent or ostensible authority (Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147) . Specifically, when...