When does the agent exceed his authority?

This question was examined in the high-profile case between celebrity chef, Gordon Ramsey and Gary Love. The focus of this case was the relationship between Gordon Ramsey (“Mr Ramsey”) and his father-in-law Christopher Hutcheson (“Mr Hutcheson”). In this case the High Court considered the scope of an agent’s authority and the use of a signature machine.

Mr Ramsey had left the management of his business wholly to his father-in-law. Throughout this arrangement, Mr Ramsey did not expect Mr Hutcheson to keep him informed of all the details of the business transactions and he knew that he was not being kept informed of all transactions. Mr Hutcheson used a signature machine to execute the principal's signature on legal documents, which Mr Ramsey was aware of. A dispute arose about whether Mr Hutcheson had the necessary authority to commit Mr Ramsey to a contact using the signature machine.

The Court examined the working relationship that Mr Ramsey and Mr Hutcheson had, which spanned twenty years. The Court found that the long relationship that the pair had was strengthened by their personal relationship as father-in-law and son-in-law. Their relationship was based on total trust. The Court held that Mr Hutcheson had the sufficient authority to enter into a personal guarantee and contract on Mr Ramsey’s behalf based on the way that they had conducted their dealings in their twenty-year working relationship.

This case highlighted the importance of principals clearly setting out a clear scope of their agents’ authority. By having a clear range of activities set out of what an agent is allowed to do, disputes about agents exceeding their authority can be avoided. This matter also demonstrated that signature machines can bind a party so long as there is appropriate authority to use it. This case will be of importance particularly to family businesses where family members are more likely to have agent/principal relationships centered on trust. Businesses need to be aware of the authority given to its agents and particularly how personal relationships can impact on the authority that an agent has.

Source: http://www.cheyneygoulding.co.uk/resource-centre/2015/when-does-the-agent-exceed-his-authority/