The recent well publicised case of Gordon James Ramsay v Gary Love [2015] EWHC 65 (Ch) concerned the scope of an agent’s authority to bind his principal.
In the case Gordon Ramsay claimed that a “ghostwriting” machine was used by his father-in-law to forge his signature without his authority, meaning that he should not be liable for the £640,000–a-year annual rent on an upmarket London pub.
The High Court disagreed and held that on the basis of the parties’ 20 year working relationship and course of dealings the celebrity chef’s father-in-law did have sufficient authority to contract on his behalf.
The case highlights a number of important points:
1. A principal must clearly set out the scope
of an agent’s authority in a formal Agency Agreement;
2. Over time, the relationship should be reviewed to make sure that the scope of the agent’s authority hasn’t changed due to a course of dealings;
3. An agent must be clear about the scope of his authority to avoid exceeding the scope of his authority and becoming personally liable for contracts;
4. A person dealing with an agent acting on behalf of a principal must check that the agent is acting within the scope of his authority to avoid a challenge as to the validity of the contract; and
5. A signature machine can be used to effectively bind a person where there is authority for its use.
A small investment, at a tiny fraction of the cost of the litigation in this case (Ramsay’s legal bill is believed to be more than £1 million), could have avoided the unprofitable agreement being entered into in the first place and if had, the subsequent dispute arising.
For further advice or assistance concerning the scope of an agents authority contact Farleys’ specialist Commercial & Corporate law team on 0845 050 1958. Alternatively, please complete the online application form and a dedicated solicitor will respond to your enquiry.