Authority, not job title, is what binds
A contract signed by someone without authority may not bind the company they claimed to act for. The question is never just whether the signatory had an impressive title; it is whether they had the power to commit that entity to this deal.
That is why a senior name on an email or a signature page is not the end of the inquiry. The law asks what authority actually sat behind the signature.
Actual authority: express and implied
Express actual authority is granted directly - by a board resolution, a shareholder approval, or a power of attorney. It is the cleanest basis to rely on, because it is documented.
Implied actual authority fills the gaps. It covers what is necessarily incidental to an express authority (a chief executive can do what is within the usual scope of that office), what is customary for the role in similar circumstances, and what the parties have done in their previous dealings. The further a deal sits from the role's usual scope, the less safe the assumption.
Apparent (ostensible) authority: bound without actual power
A company can be bound even where the agent had no actual authority, if a reasonable third party would have understood the agent to have it. This works because the company held the agent out as authorised - the impression was created by the company, not manufactured by the agent.
So the source of the representation matters. An agent cannot give themselves authority by acting as if they have it.
The Freeman & Lockyer test
Freeman & Lockyer v Buckhurst Park Properties [1964] 2 QB 480 sets four conditions for a company to be bound by an agent's apparent authority: a representation that the agent had authority was made to the contractor; the representation was made by someone with actual authority to manage the company, such as the board; the contractor relied on it; and the company's constitution did not prohibit the transaction.
The critical element is the representation by the company. The holding-out has to come from someone who genuinely had power to run the business, not from the agent's own conduct.
The limit: being put on inquiry
Apparent authority only protects you until the circumstances should put you on inquiry. Where the deal looks unusual, self-interested, or otherwise suspicious, and a reasonable person would check the actual authority, failing to do so can cost you your enforcement rights (Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28).
In plain terms: if something about the signing looks wrong, you cannot close your eyes and rely on appearances. You are expected to verify before you sign.
How to verify authority in practice
For anything material, ask for the board resolution or written authority for the specific transaction, and check the entity's constitution does not restrict it. Where a power of attorney is relied on, read its scope. Be especially careful with deals that benefit the signatory personally, sit outside the ordinary scope of their role, or are unusually large for the counterparty.
This is also where contract review earns its keep. Edits to authority, signatory, and execution clauses change who can commit a party, and deserve attention rather than a quick wave-through.
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Practical checklist
- Confirm the signatory's actual authority for this specific deal - a senior title is not proof.
- For material deals, get the board resolution, power of attorney, or written authority, and check the constitution does not prohibit it.
- Remember apparent authority must come from the company holding the agent out, not from the agent's own say-so.
- If anything about the signing looks unusual or self-interested, treat it as being put on inquiry and verify (Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28).
- Watch redlines to authority, signatory, and execution clauses - they change who can bind a party.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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