Areas of law

Directors express authority, ceo's implied authority, De facto CEO.

Issues

Whether or not Arhin is entitled to payment from ABC ltd in respect of the contract entered into by
Twum.

Whether or not Twum's acts as CEO binds the company

Rules

Directors express authority is the authority to make decisions on behalf of the such as entering into
contracts if the director is authorized to do so by the company's regulation in the ordinary course of the
company's business. Directors are appointed to direct and dadminister the business of the company. In
the discharge of his duties, directors become agents of the company and in effect their acts expressly
stated in the regulation legally binds the company.

CEO's implied authority is the authority granted to the CEO to perform acts which are reasonably
incidental to and necessary for the effective performance of his duties. Authority may be implied by the
court, customs of trade or by virtue of his position as a CEO. where enough evidence reasonably attests
that the ceo's act was implied and that he was acting in the best interest of the company, that act is
legally binding on the company.

De Facto CEO is one who is not duly appointed as a ceo but holds himself out as CEO or allow themselves
to be held out as one. Where a third party deals legally with such a person, the contract will be legally
binding on the company under some conditions restricted to some limitations.

Turquand Principle is a rule that was established in the case of royal British Bank vs Turquand. The rule is
to the effect that person's contracting with the company in good faith may assume that the officers of
the company or their agents have been properly authorized or the regulation of the company and it's
powers have been properly and duly complied with unless there are facts indicating otherwise. this
principle is based on the business efficacy under the companies code, a person dealing with a company
may assume that the company's regulation has been duly complied with and that any document issued
by an officer of the company is genuine. This is also known as presumption of regularity.

Limitations to the Turquand Principle

This rule will not be enforced by the court and that the company will not bear liabilities under a contract
if the following conditions prevail. The third party can not rely on the rule,

1. where in fact he has knowledge of the irregularity.

2. Where due to his position in relation to the company ought to have been aware of irregularity or lack
of autgority.

3.if he is put on enquiry but he fails to enquire. Sometimes the transaction may appear suspicious which
may incite a reasonable person to conduct enquiry if the third party fails to do so he cannot rely on the
rule.

Analysis

Since the sole running of the business is left to Twum, he becomes the managing director in the sense
that he is vested with some power to do so by the board of directors although this may be subject to
some restrictions or terms as the board deems fit. Although Twum purports to be a CEO of the company
without official appointment, the board didn't make any representation to dispute the fact. In effect,
twum assumes the authority of the CEO in dealing with third parties.

Conclusion

Twum's acts as the CEO bind the the company. Also Arhin is entitled to payment from ABC Ltd in respect
of the contract entered into by Twum if he, Arhin had no knowledge of Twums faulty title as CEO or
should have known of the irregularity.