The issue in this scenario is, whether Matt had the authority to enter the contract and whether EngCo Pty Ltd can enforce that contract. It is outlined in, that the outsider dealing with the company can assume that the management director and the agent can exercise their customary power. Although Matt does not have the actual authority or ostensible authority to enter into this contract on behalf of BuildCo Ltd, EngCo can still rely on statutory assumptions and indoor management rule, therefore EngCo can enforce the contract. According to , the board may grant a management director any power which the board of directors can exercise. However that is not absolutely guaranteed. Since Jenny mentioned later that ‘those important contracts will always have to go through the board in BuildCo’, Jenny did not have the actual authority to enter into this contract, despite being the management director of BuildCo. Therefore, Matt does not have actual authority either, since his authority comes from Jenny, who herself does not have the actual authority to confirm such contract. Matt does not have the ostensible authority. It is outlined in , that the person making the representation that the agent has authority must be someone with actual authority. Since Jenny herself does…show more content… Since EngCo had no knowledge that BuildCo have such unique rules, it could assume that all internal proceedings inside BuildCo have been carried out properly. In reality that is not true and there is indeed an irregularity going on inside BuildCo, since Jenny told Matt to take care of all issues but did not tell him that those issues do not include important contract. However, it does not affect EngCo. EngCo has no actual knowledge of the irregularity that is happening inside BuildCo, and was therefore not affected by internal management irregularity. EngCo can also protect itself by using indoor management
