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Companies enter into contracts Companies can enter into contracts in 2 ways:  Directly – by the company itself performing the necessary acts  Through an agent – Who has authority from the company Contract directly There are 2 aspects to corporate contracting. 1. The first relates to the decision to enter into the contract 2. The second relates to the execution of the contract. When the board exercise its power as collective decision-making body within the spheres as delimited by the Act and the constitution, the board is acting as company. The board’s act would be regarded as the acts of the company itself. The company may not always need to use its common seal to execute a document. The decision to contract may be taken by the board of directors. Actual Authority Where the principal has actually agreed that the agent can act on behalf of the principal(company), the agent has actual authority. Actual Authority can be either Express Actual authority or Implied Actual authority. 1. Express Actual Authority The principal says that the agents can act for the principal. Where a company is concerned, express actual authority can arise in:  From a provision in the company’s constitution  By the BOD delegating its power and expressly authorising a particular person to exercise this power.  From a provision in the agent’s employment contract or contract of appointment. Express actual authority from a provision in the company’s constitution A company may expressly provide that specified persons are authorised to act for the company in specified circumstances. It may be provided in a company’s constitution that the MD shall exercise the company’s borrowing powers. Such a regulation does not run counter to S157A as it does not diminish(reduce) the board’s general power of management granted by that section. S157A The business of a company shall be managed by, or under the direction or supervision of director.

Express actual authority through delegation by the board The board of director delegates some of its own actual authority to somebody else. Express actual authority from a provision in the agent’s employment contract or contract of appointment. The actual authority of the agent is derived from the terms of contract. It may be provided in a human resource manager’s contract of appointment that he has the authority to hire staff on behalf of the company whenever it is necessary to do so. The scope of the agent’s actual authority conferred by contract may also be garnered from the company’s internal documents. In this manner does not extend to fraudulent actions on the part of the agent.

2. Implied Actual Authority The principal done something:  Appointing someone to certain position  Acting to give the person authority, including through acquiescence Implied Actual Authority through appointing a person to particular position  Implied authority of the CEO or MD When the board of a large company appoints a CEO, there will almost always be a delegation of authority by the board to the CEO, This will normally involve express actual authority that a grant of implied actual authority to “do all such things as fall within the usual scope of that office”. The usual scope of a CEO’s powers will depend on what is customary or usual for a CEO in a similar company carrying on a similar business. In general, Court have said that:  A CEO’ usual functions include dealing with everyday matters, supervising the daily running of the company, supervising other senior managers and generally being in charge of the company’s business  Do not Include entering a transaction that cannot be characterised as an ordinary trading transaction or selling the company’s main business.  Implied authority of other executive officers These executive officers may have some implied actual authority reflecting the scope of authority that is usually delegated to someone doing their type of job in their type of company.  Implied authority of a director, acting alone. While the BOD can pass resolutions that are binding on the company, individual directors do not usually have the power to bind the company. Where a company has more than one director, the courts have said that a director acting alone has no implied actual authority to bind the company in contracts with outsiders. For an individual director in multi-director company to have any authority to bind the company contractually, either the authority must have been expressly granted to him or the authority must have flowed from conduct of board as a whole.

Apparent Authority Apparent authority can arise even where the principal has not in any way agreed that the agent can act on behalf of the principal. Apparent authority can be proved if the principal represents that the agent is authorised to act and a third part y relies on such representation without notice of the agent’s lack of authority. Three requirements which need to be shown for an agent to be held to have apparent authority to act for company ( Freeman Lockyer v Buckhurst Park Properties ) 1. A representation by the company that the agent has the company’s authority to transact on its behalf 2. Representation is made by someone with authority to make representations on behalf of the company 3. The other parties relied on the representation. A representation by the company A representation must be made to the outside contracting party that the agent has authority to enter into a contract of the type in question of behalf of company. The agent must be “ held out” as having authority to act on the company’s behalf. The representation may consist of words or conduct. By someone with authority http://www.cpaireland.ie/docs/default-source/Students/Study-Support/P1-Corporate-LawsGovernance/pilot-paper.pdf?sfvrsn=0...