F2. Chapter 1 - My notes on what are the different types of Authority of an agent. PDF

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My notes on what are the different types of Authority of an agent....

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What are the different types of Authority of an agent? The different types of authority of an agent are: 1. Express Authority 2. Implied Authority 3. Apparent Authority

AGENT

THIRD PARTY

1. Express Authority The strongest form of Authority is that which is expressly granted, often in written form. The principal consents to the agent’s actions and the third party may then rely on the document. Express Authority allows the agent to act on behalf of the principal and engaged in decision making, for example, for a company. Whatever is done legally by the agent, the principal is bound by it. An example of an express authority is the contract of employment of a director with a company. The authority of the director is clearly expressed in the contract of employment. Similarly, the duties of an employment are clearly expressed in his contract of employment couples with a job description.

2. Implied Authority There are 2 types of actual authority namely express authority and implied authority. Implied authority also known as “usual authority” is the authority of an agent acting on behalf of another person or entity (principal). The person acting with implied authority does what is reasonably necessary in order to effectively perform his duties. The acts undertaken surrounding the case of implied authority depends on the circumstances. Implied authority is not specifically expressed or defined in writing in the agency agreement. For example, when an employee or agent wears a uniform nametag or has a business card bearing the trademark or logo of a company, that individual carries implied authority. This is because customers are likely to assume that this individual has authorisation to act on behalf of the company. The same would be true of an employee sent by a company or agent to make repairs, even if the employee wore no uniform or nametag. Implied authority is an integrated part of an agent’s authority because it is impossible to define every single aspect of the agent’s authority in a written contract. Each partner of a business has the implied authority to act in the name of the company. Such acts are binding on the other partners, so long as they fall within the ordinary course of business. Such acts of implied authority may include: 1. 2. 3. 4.

Buying or selling on behalf of the company. Accepting payments on debts owed to the firm Accepting, making or issuing bills on the firm’s behalf. Taking on a new lease on the firm’s behalf.

Even when there is no implied authority, in an emergency the agent may act in ways that would in normal course require specific permission from the principal. If unforeseen circumstances arise and it is impracticable to communicate with the principal to find out what his wishes would be, the agent may do what is reasonably necessary in order to prevent substantial loss to his principal.

3. Apparent or Ostensible Authority An agent is said to have apparent or ostensible authority if: 

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The principal has made a representation (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. The 3rd party has in fact relied on such representation to deal with the agent. The 3rd party has altered/changed his position resulting from such reliance, for example, assuming obligations under a contract.

Apparent authority is an application of the principle of good faith where the principal is not allowed to denied his representation....