Such authority is what is perceived by third parties to have been vested in an agent by the principal. The existence of such authority requires a representation to have been made to the third party. Such representation should originate from the principal or some entity having accrual authority3.
In Freeman amp. Lockyer v Buckhurst Park Properties (Mangal) Ltd, the company was held to be liable, because the managing director had the authority to enter that particular type of contract on behalf of the company4.
Angelina had been representing Brad, in his business, for many years. She used to help Brad in running his business, as she was well versed with makeup articles. As such, she had been acting as a representative of Brad, while conducting business with third parties. According to the ruling in the Freemans case, Angelina had acted as an agent of Brad, while entering into a contract with Aniston Ltd. This contract with Aniston Ltd is valid, in accordance with the principle of ostensible authority, which permits an agent to form a valid contract on behalf of her principal. Consequently, Brad is responsible for the acts of Angelina, while doing the business, including the contract with Aniston Ltd.
Instances where a company’s director will be held liable are given in the sequel. If a director wilfully acts over and above the powers bestowed upon him by the articles of association of the company, then he will be held liable for such transgressions. If the company becomes insolvent as a result of the fraudulent activities of a director, then he will be held to be responsible.
Section 174(1) established the duty to exercise reasonable care, skill and diligence. This duty enshrines the rule of duty of care and skill of common law. Section 174(2) describes the amount of care, skill and diligence to be exercised by a director. Furthermore, the directors of a limited company are not personally liable for the acts of the company. However, if a director abuses his position in the company, then he will be held personally liable and prosecuted accordingly6.
Brad, as a director with a fiduciary duty towards the company, has to ensure the well being of the company. He sold ‘ 100,000 worth goods to Sess for ‘60,000. As a director of the company, Brad cannot act in a manner that causes a loss to the company. For example, Section 172 of the Companies Act 2006 imposes a duty to promote the success of the company on its directors. This duty had been developed from the fiduciary duties owed by directors, such as duty of good faith and the duty to act in the best interests of the company7. Selling goods at a lower price results in financial loss to the company, and thereby implies a breach of statutory duties. Brad breached the fiduciary duty conferred up on him by section 172 of the Companies Act 2006.
The director has to consider the long term consequences of the decisions taken in the interest of the company. He has to consider the interests of the employees of the company and other factors such as the relationships with the clients and suppliers of the company. In addition to these