For several years Tobias, the manager of a garden centre, has ordered stock from Greenleaf Supplies in the owner's name and the owner has always paid. The owner then privately tells Tobias he must no longer place orders above £5,000, but does not tell Greenleaf. Tobias orders £9,000 of stock from Greenleaf. Is the owner bound?

Correct answer: B) Yes, because Tobias had apparent authority based on the owner's previous conduct towards Greenleaf

Explanation

Apparent authority arises where the principal represents to a third party, often by a course of dealing, that the agent has authority, and the third party relies on it. The owner let Greenleaf deal with Tobias without limit and did not tell Greenleaf of the new restriction, so he is bound (compare Freeman & Lockyer). Tobias exceeded his actual authority and may be liable to the owner, but that does not affect Greenleaf. Ratification is not needed.