Why should the law give legal force to contracts created by

1. Why should the law give legal force to contracts created by agents who have only
ostensible or apparent authority? What is the meaning of ‘estoppel’ and ‘Ostensible’?
Cite a relevant case.
“The concept of estoppel in agency law is a doctrine by which one can be estopped to deny that
another person is his or her agent. The doctrine of estoppel is closely related to that of apparent
authority, and in many cases where estoppel would apply apparent authority would also apply.
One significant difference is that apparent authority does not require detrimental reliance to bind
the principal, whereas estoppel does. On the other hand, apparent authority requires a
‘manifestation’ by the principal whereas estoppel does not. Another term sometimes used for
estoppel to deny agency is the term ‘ostensible authority.’ Courts sometimes use the term
‘ostensible authority’ to refer to estoppel to deny agency. In other cases, courts appear to use the
term ‘ostensible authority’ to refer to apparent authority.” (Witnesseth).
“Apparent (also known as ‘ostensible’) authority is subtler than actual authority. This involves an
agency relationship being created through the appearance of authority conferred on the agent. No
agreement between the company and agent is required. Fortunately, there is a limit on apparent
authority in that a person with apparent authority cannot grant further authority on anyone else.
For companies involved in heavy contracting, such as the fuel industry, apparent authority is an
important risk that needs to be controlled. Companies are advised to continually review who is
listed in documents, websites and the like as having authority to enter into contracts to ensure
that outside parties are not misinformed. While this takes vigilance, the alternative is binding!”
((Externally, 2019).
“Since a company is regarded as a separate artificial legal entity, it can only be represented by
individuals. Companies can make contract through individuals who can act on its behalf. Agent
is an individual or firm authorized to act on behalf of another (called the principal), such as by
executing a transaction or selling and servicing an insurance policy. An agent may also have
implied authority. Implied authority most frequently arises when an agent is placed in a
particular position by the principal. In Brick and Pipe Industries Ltd v Occidental Life Nominees
Pty Ltd (1992) 10 ACLC 253, a director had implied authority to act as the company because he
held a controlling shareholding and no attempt was made to interfere with this assertion of
control. For example, according to the Hely Hutchinson v Brayhead Ltd (1968) 1 QB 549, an
agent who is appointed to manage a business has implied authority to make all those contracts
that a manager in such a position customarily has. f principal’s acts or words lead another to
believe that he has appointed the agent to act on his behalf. Principal will generally be estopped
from denying agent’s authority though in fact no agency really existed. The agent is said to have
apparent or ostensible authority. In Freeman and Lockyer v Buckhurst Park Properties (Mangal)
Ltd (1964) 2 QB 480, managing director has the customary authority to make contracts related to
day to day management of the company’s business. The recent case of Armagas Ltd v Mundogas
SA ruled that where agent is known to have no general authority to enter into transactions but
agent falsely represented to the third party that he had obtained from principal specific authority
to enter into a one off transaction, principal would not be bound by agent’s action.” ("The
Company Is an Artificial Legal Person", 2019).