Turquand Case Indoor Management Rule

Whether or not the company can be bound by the act of its agents, namely the directors or officers

Express or Implied Authority

Ostensible or Apparent

Defect of Appointment of Director

Defect in the appointment their act is still valid as against a third party.

Freeman Lockyer 1964 Court of Appeal Case

Facts: Actual Authority

Acting as a Director

No minutes were taken

Relationship between the Principal and the Agent

Whether or not the company is bound by the actions of an individual acting as a managing director?

Actual authority is a contract between the principal and the agent. Hence there was deemed to be a contract between the company and Mr. Kapor

A contract between the company and the agent where the contract says that I the company have given.

Ordinary Construction

Distinction between Actual Authority and Ostensible Authority

What the third party saw and

Legal relationship between the principal and the third party, where the principal has made a representation to the third party.

Four Stage Test

1. Representation by the principal that the agent had the power to enter this kind of contract on behalf of the company (Permitting Mr. Kapor to act as managing director that was a representation by the company)

2. Representation made by a person who appears to have actual authority to manage the business (Articles conferred full power to the board and hence the board had full capacity)

3. The third party is induced by the representation to rely on the representation 4. Under the Memorandum and Articles the company is not deprived of the capacity to enter into

the kind of contract sought to be enforced or capacity to delegate to an agent. (Articles allowed the authority to delegate.)

Heely and Richardson

Silent Acquiescence

Knowledge and Acquiescence of the Board

Ostensible Authority is as it appears to others namely third party.

British Bank Sun Life 1933

Look at the representation of the principal and not the agent

The agent holding out himself as having authority is not sufficient to create ostensible authority

Mundogas v Mundogas

Plaintiff company buying a ship

The principal is bound provided the agent has actual or ostensible authority.

Self Authorizing of the Agent is not deemed to be a representation made by the Principal.

Actions of the agent were condoned by the principal.

Office Manner in which he conducted himself

Look at the principal’s conduct as a whole (vis a vis the third party)

Provided an agent has been granted the title and position of Managing Directors it will be deemed that he will possess the authority that managing director normally do.