5. Creation of agency, and the authority of the agent

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• The first is that the capacity of a corporation is limited by its constitution, that is, in the case of a company incorporated under the Companies Act, by its memorandum and articles of association; the second is that a corporation cannot do any act, and that includes making a representation, except through its agent

• An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties

• Usual authority, ie an agent has implied actual authority to do what is usual in his trade, profession, or business for the purpose of carrying out his authority or anything necessary or incidental thereto.

• An ‘apparent’ or ‘ostensible’ authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on p. 126↵behalf of the principal into a contract of a kind within the scope of the ‘apparent’ authority, so as to render the principal liable to perform any obligations imposed upon him by such contract.

• e relies either upon the representation of the principal, that is, apparent authority, or upon the representation of the agent, that is, warranty of authority

• by permitting the agent to act in some way in the conduct of the principal’s business with other persons.

• the representation as to the authority of the agent which creates his ‘apparent’ authority must be made by some person or persons who have ‘actual’ authority from the corporation to make the representation.

• of a company the board of directors who have ‘actual’ authority under the memorandum and articles of association to manage the company’s business permit the agent to act in the management or conduct of the company’s business, they thereby represent to all persons dealing with such agent that he has authority to enter on behalf of the corporation into contracts of a kind which an agent authorised to do acts of the kind which he is p. 127↵in fact permitted to do usually enters into in the ordinary course of such business.

• the company is estopped from denying to anyone who has entered into a contract with the agent in reliance upon such ‘apparent’ authority that the agent had authority to contract on behalf of the company.