LEGAL PRINCIPLE: COMMERCIAL LAW – Agency – Liability of Holding Company for Subsidiary
PRINCIPLE STATEMENT
Under the doctrine of apparent or ostensible authority, if a person by words or conduct represents that another has authority to act on his behalf, he may be bound by the acts of that other as if he had authorised them.
RATIO DECIDENDI (SOURCE)
Per Mohammed, JSC, in Jallco Limited v. Owoniboys Technical Services Limited (1995) NLC-2701988(SC) at p. 9; Para C.
"Under the doctrine of apparent or ostensible authority where a person by words or conduct represents to a third party that another has authority to act on his behalf, he may be bound by the acts of that other as if he had in fact authorised them."
EXPLANATION / SCOPE
A holding company may be liable for its subsidiary’s acts if it held out the subsidiary as having authority. The principle applies to agency relationships. The third party must have relied on the representation. The holding company may be estopped from denying authority. The rule protects third parties dealing in good faith. The court will examine whether there was a representation. The principle is based on estoppel. The holding company may avoid liability if it did not hold out the subsidiary.