Assignment 2: Law of Agency - Actual vs. Apparent Authority Analysis

This assignment provides a critical discussion of the main differences between actual and apparent authority under the law of agency. It begins with an introduction to the concept of agency, defining it and outlining its key features, including the roles of the principal, agent, and third parties. The essay then delves into the different types of agent authority, such as express, implied, and apparent authority, and clarifies the distinctions between actual and apparent authority. Actual authority is further broken down into express and implied forms. Apparent authority is explained through the lens of key legal cases such as Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd. The assignment highlights the importance of understanding these authorities in commercial transactions. Finally, the essay concludes with a summary of the key differences and their implications, referencing relevant case law to support the arguments.

Contents
ASSIGNMENT................................................................................................................................2
Critically discuss the main differences between actual and apparent authority under the law of
agency..............................................................................................................................................2
Introduction......................................................................................................................................2
Agency.............................................................................................................................................2
Definition.....................................................................................................................................2
Features of agency.......................................................................................................................3
Different types of agents authority...............................................................................................4
Main difference between actual and apparent authority..................................................................5
Actual authority............................................................................................................................5
Express actual authority...........................................................................................................5
Implied actual authority............................................................................................................5
Apparent authority.......................................................................................................................5
Distinction amid the two authorities............................................................................................6
Conclusion.......................................................................................................................................7
Reference List..................................................................................................................................9

ASSIGNMENT
Critically discuss the main differences between actual and apparent authority under the
law of agency.
Introduction
One of the significant concepts that prevail under Business law is the concept of agency. The
agency law is very important in commercial arena because when the people undertake any
business activities then they require agents in order to represent them in front of the third parties.
If the appointment of agents are not permitted then it becomes tedious to carry on business
activities. The role of the agent is very vital as they are the middlemen who play active roles
amid the business persons and the third parties. (Pont 2013)
Through this paper an attempt is made to understand the concept of agency, the main features
that are attributed to the concept of agency, the authorities that are possessed by the agent. It is
then a critically analysis is made on the distinction that exists amid the actual authority and the
apparent authority under the agency law.
The paper is critically evaluated with the help of both primary and secondary sources of law.
It is now first important to understand the definition that is attributed to the law of agency.
Agency
Definition
The Agency law in United Kingdom is part of the business law of the country. The law of
agency laid down the set of rules that are required for proper functioning of the business and to
maintain the relationship amid the principal and the agents. The law of agency simply submits
that the persons (agents) who are conferred with the power by the principal so that the agents can
bind the principal by dealing with the third parties, then, such relationship is nothing but a
relationship of agency amid the agent and the principal. To simply state, the law of agency is
nothing but a relationship which is established amid two persons, that is, an agent and the

principal wherein the agents is authorized with the tasks to establish contractual relationship
amid the third parties and the principal or to represent the principal, in any manner whatsoever.
(Benett 2014)
Thus, there are two types of contractual relationship that exist under the law of agency, that is,
firstly, a relationship that is made amid the agent and the principal wherein the agent seeks
authority from the principal according to which he is permitted to take acts or omissions on
behalf of the principal; secondly, a relationship that is made between the third party and the
principal wherein the agents conduct is within his power will bound the principal, with the third
parties. (Munday 1998)
Thus, through the law of agency a relationship is established between an agent and the principal
and the agent is empowered to represent the principal by his acts or omission and has the
capacity to set up a connection amid the principal and the third party to which the principal is
contractually bound. It is now important to understand some of the significant features that are
attributed from the law of agency.
Features of agency
The law of agency is a relationship that is established between the agent and the principal,
through which the agent is endorsed to represent the principal in front of the outsiders. Some of
the significant features of the agency law includes: (Management Notes 2018)
i. There are three parties who are involved in any agency relationship, that is, the
principal, the agent and the third parties;
ii. The agent represents the principal and is endorsed to undertake actions for the
principal;
iii. It is necessary that the principal must delegate the authority to the agent who is then
authorized to represent the principal;
iv. Both the principal and the agent must be the persons who are capable to enter into
contract.
v. There is no need of the presence of any kind of consideration.
vi. The principal has the power to appoint the agent for any purpose that deems fit;
vii. The acts by the agent within his power will bound the principal.

Different types of agents authority
When any principal delegates any power to an agent, then such an agent is the delegate of the
principal and the conduct by such an agent within his authority will bound the principal. There is
no single kind of authority that is posses by an agent. Some of the types of authority that is
possessed by an agent includes:
i. Authority acquired under contract – The authority that is possessed by an agent under
the contract is an agency which is created under agreement. This can be either given
directly by the principal or the power that is possessed by an agent though implication
(implied authorities). (Munday 2010)
ii. When the agent is not authorized but undertaken certain acts which are outside his
scope of authority. When such unauthorized act are ratified by the principal, the new
authority that is possessed by an agent is called an agency by ratification; (Munday
2010)
iii. When the principal himself holds out in front of an outsider that certain person is
authorized to take certain acts on his behalf, then, the authority that is posses by an
agent is called an agency by estoppel. Any act that is undertaken by the agent within
such representation will bound the principal and the principal cannot later take the
shield that he is not by the acts as the same are outside the authority of the agent.
(Cahn and Donald 2010)
iv. The authorities that are possessed by an agent under law are an agency by operation
of law. for instances, in situation of necessities, wherein the agent is not able to seek
the instructions of the principal and it seems necessary to take certain acts by the
agent considering the need of the situation, then, in such cases, the power that is
assumed by the agent is called the authority in necessity and is bound upon the
principal under the operation of law. The concept was rightly held in the leading case
of Great Northern Railway Co v Swaffield (1874). (Gillies 2004)
It is now important to understand two of the most important authorities that are generally
acquired by an agent and which includes actual and apparent authority.

Main difference between actual and apparent authority
Actual authority
The authority that is delegated by the principal to an agent directly and without an intervention.
Thus, an actual authority is generally bifurcated into two broad categories that is, express actual
authority and implied actual authority. (Furmston 2010)
Express actual authority
In the leading case of Ireland v Livingstone (1872) the court submitted that the authority that is
acquired by an agent expressly by the principal, then, such authority is called express actual
authority. The agent is bound to act within the limitation and the boundaries of the actual express
authority and any act exceeding the express actual authority is not bound upon the principal.
(Murdoch 2014)
Implied actual authority
In the leading case of Hely-Hutchinson v Brayhead Ltd [1968] the court submitted that the
implied actual authority is also called usual. These are the kinds of authority that are possessed
by an agent and are required reasonably in order to carry out the acts that are undertaken while
carrying out express authority by an agent. It is a kind of authority which is implied or assumed
by the agent considering the responsibilities that are assigned to an agent. They come as part and
parcel of the express actual authority of an agent. The concept of implied actual authority is also
laid down in Chan Yin Tee v William Jacks and Co (1964). (Rush and Ottley 2006)
Apparent authority
In Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952], it was held that an
authority which is assumed by an agent because of the representation that is made by the
principal to an outsider and the outsider enters into contact with the agent on the belief of such
representation that is made by the principal. It is the representation which grants power to the
agent and acts carried under such representation will bind the principal with the third party. In
Freeman &Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] the court submitted that
when it is the conduct of the principal, made the outsider consider that the agent does acquire
power to connect the principal, then, any contract by the outsider with the agent based on such
representation made by the principal establishes a contractual relationship amid the parties. In

Armagas Ltd v Mundogas Ltd or The Ocean Frost [1986] it was held that apparent authority can
be assumed by the agent only when there is some representation that is made by the principal in
front of the third parties. (Monaghan 2010)
After having a brief understanding on the two main authorities that are possessed by an agent, it
is now important to understand the basic distinction that is hold amid the two kinds of
authorities.
Distinction between the two authorities
In order to understand the distinction amid the actual authority and the apparent authority that is
assumed by the agent, it is important to have a brief understating of a significant and leading case
Freeman and Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd. Through this legal
judgment a critical distinction is drawn amid the two kinds of authorities.
It is rightly held by Lord Diplock in the leading case that "Actual authority and apparent
authority are quite independent of one another. Generally they coexist and coincide but either
may exist without the other and their respective scope may be different."
In the above mentioned case the position of the Managing Director of the company is analyzed in
a situation wherein he is not duly appointed to establish contractual relationship with the
outsiders as per the articles of the company. The case submits that a Plaintiff firm (Freeman and
Lockyer) is in involved in the trade and Buckhurst Park Properties (Mangal) Ltd is the defendant.
Mr Shiv Kumar Kapoor and MrNimarjit Singh Hoon are the part of the defendant.
The Westminster County Court decided that the decision must be held in favor of the plaintiff. It
was held that MrKapoor was not the appointed MD of the board but he behaved as an MD within
the acquaintance of the board of directors. The Court of Appeal sacked the appeal of the
defendant and held that it is not the duty of the plaintiff company to inquire whether MrKapoor
is duly appointed as the MD of the defendant company as per the articles.
Lord Diplock submitted that there is sheer difference amid the actual and apparent authority that
is possessed by the agent. It is submitted by him that when there is a presence of a legal
relationship amid the agent and the principal which is established by consensual agreement amid
the parties only then the authority that is possessed by an agent is an actual authority. Whereas
an ostensible or the apparent authority is the authority wherein a relationship is established amid

the agent and the outsider which is created based on the representation made by the principal to
the outsider. The outsider is then establish a contractual relationship based on such representation
in good faith and the agent thus possess the apparent authority and any contract made under such
authority is binding upon the principal and the outsider.
There are four major elements which must be present according to Lord Diplock in order to
establish apparent authority, which includes, firstly,a depiction is made by the company to the
outsider which portrays that the agent has the power to bind the company by his actions;
secondly, the representation must be made by such member of the company who has the actual
authority to make such a representation; thirdly, the outsider must make a contract with the agent
based on the representation so made and lastly, the articles or the memorandum must specify that
the company is authorities to delegate the authority that is given to the agent by the
representation.
It was clearly submitted in the leading case the Actual authority and apparent authority are quite
independent of one another. Generally they coexist and coincide but either may exist without the
other and their respective scope may be different.
In Hely-Hutchinson case it was analyzed by Lord Denning that the actual authority the express
authority granted to an agent and an apparent authority is the authority that appears to be hold by
an agent which exist because of the representation made by the principal on front of the outsider.
In the said case it was analyzed that at times the apparent authority coincides with the implied
actual authority of an agent. But, later it was analyzed that both the authorities might exist
without the presence of other.
Conclusion
It is thus concluded that both the actual and apparent authorities are different from one another.
However, the presence if actual authority is stronger when compared with apparent authority.
Apparent authority is a circuitous authority whereas an actual authority is the direct one. Both the
authorities have their own relevance and both are independent from each other.

Reference List
Books/.Articles/Journals
Benett, H. 2014. Principles of the Law of Agency. Bloomsbury Publishing.
Cahn, A and Donald, D. (2010) Comparative Company Law: Text and Cases on the Laws
Governing Corporations in Germany, the UK and the USA. Cambridge University Press.
Furmston, M. 2010. Principles of Commercial Law 2/e. Cavendish Publishing.
Gillies, P. (2004). Business Law. Federation Press.
Monaghan, C. (2010) Beginning Business Law, Routledge.
Munday, B. S. (1998). An Outline of the Law of Agency. Fourth Edition. London, Edinburgh &
Dublin: Butterworths.
Munday, R. 2010. Agency: Law and Principles. OUP Oxford.
Murdoch, J. (2014). Taylor & Francis.
Pont, G. (2013). LexisNexis Butterworths.
Rush, J and Ottley, M. (2006). Business Law
Case laws
Armagas Ltd v Mundogas Ltd or The Ocean Frost [1986] AC 717.
Chan Yin Tee v William Jacks and Co (1964).
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
Great Northern Railway Co v Swaffield (1874).
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549

Ireland v Livingstone (1872) LR 5 HL 395.
Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147
Online Material
Management Notes (2018) Features of the Law of Agency
<https://www.managementnote.com/features-of-contract-of-agency/>. Accessed on 12th 2018.

Reference List
Books/.Articles/Journals
Benett, H. 2014. Principles of the Law of Agency.Bloomsbury Publishing.
Furmston, M. 2010. Principles of Commercial Law 2/e. Cavendish Publishing.
Munday, B. S. (1998). An Outline of the Law of Agency.Fourth Edition. London, Edinburgh &
Dublin: Butterworths.
Munday, R. 2010. Agency: Law and Principles. OUP Oxford.
Case laws
Armagas Ltd v Mundogas Ltd or The Ocean Frost [1986] AC 717.
Chan Yin Tee v William Jacks and Co (1964).
Freeman &Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
Great Northern Railway Co v Swaffield (1874).
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
Ireland v Livingstone (1872) LR 5 HL 395.
Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147
Online Material
Management Notes (2018) Features of the Law of
Agency<https://www.managementnote.com/features-of-contract-of-agency/>. Accessed on 12th
November 2018.
The Law Teacher. 2018. Actual authority and apparent authority.
<https://www.lawteacher.net/free-law-essays/commercial-law/actual-authority-and-apparent-
authority.php>.