【正确答案】This question requires candidates to consider the authority of company directors to enter into binding contracts on behalf of their companies. Article 3 of the model articles of association for private companies provides that the directors of a company may exercise all the powers of the company. It is important to note that this power is given to the board as a whole and not to individual directors and consequently individual directors cannot bind the company without their being authorised, in some way, so to do.

【正确答案】There are three ways in which the power of the board of directors may be xtended to individual directors. (i) The individual director may be given express authority to enter into a particular transaction on the company’s behalf. To this end, Article 5 allows for the delegation of the board’s powers to one or more directors. Where such express delegation has been made, then the company is bound by any contract entered into by the person to whom the power was delegated. (ii) A second type of authority which may empower an individual director to bind his company is implied authority. In this situation, the person’s authority flows from their position. The mere fact of appointment to a particular position will mean that the person so appointed will have the implied authority to bind the company to the same extent as people in that position usually do (Hely-Hutchinson v Brayhead Ltd(1968)). (iii) The third way in which an individual director may possess the power to bind his company is through the operation of ostensible authority, which is alternatively described as apparent authority or agency by estoppel.This arises where an individual director has neither express nor implied authority. Nonetheless, the director is held out by the other members of the board of directors as having the authority to bind the company. If a third party acts on such a representation, then the company will be estopped from denying its truth (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd(1964)). The situation in the problem is very similar to that in Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd. The board of Kut Ltd has permitted Leo to act as its chief executive, and he has even used that title. The board has therefore acquiesced in his representation of himself as their chief executive and consequently Kut Ltd is bound by any contracts he might make within the scope of a chief executive’s implied authority. As the contract in question is in the ordinary run of business, it would clearly come within that authority. Consequently Kut Ltd will be liable to pay Max or face an action for breach of contract.