# Agency: authority and the external contract

> **Key takeaway:** Actual vs apparent authority (Freeman & Lockyer). Ratification if principal exists and conditions met. Undisclosed principal rules limited. Agent: fiduciary loyalty; secret commissions (FHR). Representation must come from principal.

- **Jurisdiction:** England & Wales
- **Practice area:** Commercial
- **Last reviewed:** 2026-08-04
- **Interactive page:** https://kttclegal.info/library/notes/Commercial/agency-overview
- **Keywords:** agency, actual authority, apparent authority, Freeman & Lockyer, undisclosed principal, ratification, secret commission, agent

## What is this about?

Agency allows one person (the agent) to affect the legal relations of another (the principal). Disputes turn on authority (actual, apparent, usual), ratification, and the liabilities of disclosed and undisclosed principals, plus the agent's duties to the principal.

## What is the core rule?

An agent with actual authority (express or implied) binds the principal to contracts within that authority. Apparent (ostensible) authority arises where the principal represents that the agent has authority and a third party relies on that representation (Freeman & Lockyer). Ratification may cure lack of authority if conditions are met. An undisclosed principal may sometimes sue and be sued on the agent's contracts within authority. Agents owe fiduciary duties of loyalty and care; secret commissions risk constructive trust/account (FHR).

## What are the elements or test?

1. Is there an agency relationship?
2. Actual authority — express terms or implied by role?
3. Apparent authority — representation by principal + reliance?
4. Disclosed or undisclosed principal?
5. Ratification available?
6. Agent's internal duties/breach (conflict, secret profit)?

## Which authorities matter?

- **Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480** — Classic Court of Appeal statement of apparent authority requirements.
- **FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45** — Secret commissions held on constructive trust for the principal.
- **Kelner v Baxter (1866) LR 2 CP 174 (context of pre-incorporation)** — Illustration of problems where the principal does not yet exist — ratification limits.
- **Watteau v Fenwick [1893] 1 QB 346 (controversial usual authority)** — Often-cited but criticised authority on undisclosed principal/usual authority — apply cautiously.

## How does this apply in practice?

Company law attribution and directors' authority overlap but are not identical. Commercial Agents Regulations may apply to certain self-employed goods agents (check retained/assimilated status and scope). Always identify who made the representation founding apparent authority.

## What are common pitfalls?

- Equating job title with unlimited apparent authority
- Missing that apparent authority rests on the principal's representation, not the agent's alone
- Ignoring fiduciary consequences of side commissions
- Over-relying on Watteau without noting controversy

## When would a practitioner use this?

Authority disputes in sales/procurement, broker commissions, and corporate contracting.

## Quick reference

Actual vs apparent authority (Freeman & Lockyer). Ratification if principal exists and conditions met. Undisclosed principal rules limited. Agent: fiduciary loyalty; secret commissions (FHR). Representation must come from principal.

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*Reference material from [KTTC Legal](https://kttclegal.info/), not legal advice. Work product supports instructing solicitors and barristers under their supervision. England & Wales.*