Apparent authority question - Dealing with Outsiders...

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Dealing with Outsiders – Practice Question The MD of RP Pty Ltd (‘RP’) has informally told Mark that he plans to appoint Mark as the CFO for RP. Mark went to the Cheatem Bank (‘Cheatem’) to borrow funds for RP. Mark arranges from Cheatem a term loan of $160,000 and an overdraft up to $45,000. This is in excess of the $90 k the MD has permitted and the provisions in the constitution (limiting loan to $100k) were also not followed. Assuming that RP refuses to pay back the loans; can Cheatem enforce the loan? Required: Advise Cheatem whether Mark had authority to do what he did, the type of authority he has, the consequences of RP not following the rules in its constitution and whether the Bank can enforce the loan. In your answer please refer to relevant case law and legislation. Sample Answer The first issue is whether RP entered in to the contract directly or indirectly through an agent. A company can enter into a contract through an agent that has either actual or apparent authority. Third parties may enter into
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