This advice will consider Selib’s legal position concerning three transactions entered into by her friend, Becky, on her behalf. The central legal issue is whether Becky, as Selib’s agent, acted with the requisite authority to bind Selib to the contracts with Chris, Diana, and Eddie. The analysis will focus on the principles of actual, apparent, and usual authority, as well as the doctrine of ratification.
Introduction to Agency
The relationship between Selib and Becky is one of principal and agent. An agent (Becky) is given authority to act on behalf of a principal (Selib), creating legal relations between the principal and a third party. For Selib to be bound by the contracts, Becky must have acted with either Selib’s actual authority or with apparent (ostensible) authority. If an agent acts without any authority, the principal may still be bound if they choose to ratify the contract later. Each transaction will be examined in turn.
The Sale to Chris
Selib expressly instructed Becky that she could sell items for at least 75% of the displayed price. By selling the clock to Chris for 70%, Becky breached this instruction and therefore acted outside her express actual authority.
However, Selib may still be bound if Becky had apparent authority. Apparent authority arises where a principal represents to a third party that the agent has authority, and the third party relies on that representation (Slade J in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480). By placing Becky in charge of her shop, Selib made a representation by conduct that Becky held the powers usually associated with someone running a shop. This would typically include the authority to negotiate prices with customers.
Chris was unaware of the private limitation Selib had placed on Becky's authority to discount items. A third party who is unaware of such a restriction is not bound by it (Watteau v Fenwick [1893] 1 QB 346). Furthermore, Chris believed Becky was the owner, making Selib an undisclosed principal. In such cases, the principal can generally be bound by any contract made by the agent which is within the usual authority of an agent in that position. The sale of goods at a modest discount is clearly within the usual authority of a shop manager. Therefore, it is highly likely that a court would find Becky had apparent authority for the sale.
Advice: Selib is almost certainly bound by the contract with Chris and cannot disown it.
The Sale to Diana
This transaction also involved Becky acting outside her express actual authority by agreeing to a sale at 65% of the marked price. As with Chris, the issue is whether Becky had apparent authority. However, the facts here are different. Diana is a "regular customer and good friend of Selib" and a trader herself.
A third party cannot rely on apparent authority if they know, or ought to know, that the agent lacks actual authority (Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR 1335). The facts state that the price was very low "even to a trader such as herself". This could be seen as putting Diana on notice that the discount was unusually large and that Becky might not have the authority to grant it. As a friend and a fellow trader, it could be argued that Diana should have been suspicious and verified the position with Selib. If a court were to find that Diana was put on inquiry as to the extent of Becky's authority, she would be unable to rely on apparent authority to enforce the contract against Selib.
Advice: Selib has a reasonable chance of being able to disown the contract with Diana. It will depend on whether a court believes the circumstances were sufficient to put Diana on notice of Becky's lack of authority.
The Purchase from Eddie
Becky was expressly forbidden from purchasing stock. She therefore had no actual authority to buy the jewellery from Eddie. The question is whether Selib can choose to keep the items by ratifying the unauthorised act.
Ratification is the retrospective approval of an agent's unauthorised act, which then binds the principal as if the agent had been authorised from the outset. However, there are strict conditions for ratification. A key requirement, established in Keighley, Maxsted & Co v Durant [1901] AC 240, is that the agent must have purported to be acting on behalf of a principal at the time of the contract.
The facts state that Eddie was "unaware that Becky did not own the shop", which means Becky contracted with Eddie as if she were the principal. She did not disclose that she was acting for an (unnamed) principal. As Becky did not profess to be acting as an agent, Selib, an undisclosed principal, cannot ratify the contract.
Therefore, the contract for the jewellery is a matter solely between Becky and Eddie. Selib has no legal right to the jewellery. Her refusal to give the items back is legally baseless. Eddie’s claim is against Becky, not Selib. Eddie wishes to have the items returned, and since Selib cannot ratify the contract to acquire title to them, she must return them.
Advice: Selib cannot ratify the purchase of the jewellery. She has no legal claim to the items and should return them to Eddie immediately.
References
Keighley, Maxsted & Co v Durant [1901] AC 240
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR 1335
Watteau v Fenwick [1893] 1 QB 346
