Unauthorised Transaction In Business Law
This question is related to unauthorised transactions more specifically those relating to express authority of an officer dealing with a 3rd party.
Firstly statutory protection can be examined as this provides some important points through S35A of the Companies Act 1985. The main point is that the section is in favour of a person dealing with a company in good faith and more importantly that a 3rd party is still considered as acting in good faith if they are aware that the officer did not have authority to carry out a transaction. In this case it seems the 3rd party need not concern himself with issues relating to express authority however common law may prevail. This would occur if S35A proved unclear on issues of an officer’s authority to carry out a transaction. The main common law rule is known as the “Indoor Management Rule” (Or Turquand Rule) which states that a 3rd party should assume a director is authorised and if he is not the 3rd party is not liable. This seems to back up the statutory provision that a 3rd party should not concern himself to a great extent on express authority however the Indoor Management Rule does carry the proviso that if the transaction was unusual in terms of size or nature for the officer to have authority then the 3rd party is expected to enquire (Houghton & Co V Nothard, Lowe & Wills Ltd 1927). In this case the 3rd party must ensure they enquire into size and nature of transaction. This seems to be the main proviso. Overall the 3rd party is protected through statute and common law.
