The High Court recently handed down a 200-page judgement in the case of Ivy Technology Ltd v Martin [2022], following a two-week trial. The High Court considered whether a seller of shares under a share purchase agreement (“SPA”), pursuant to which it purported to sell as the sole beneficial owner of 100% of the target shares, had contracted and made representations on behalf of another beneficial owner of some of the shares who was not included as a party to the transaction (“Transaction”). In its judgement, the court considered the relationship between agent and principal…

practical take away

A principal is liable for all the acts of its agent, within the agent’s authority. Authority means, the agent’s actual, apparent (ostensible) or usual (customary) authority. It is an established principle of agency that where a disclosed principal (whether identified or unidentified), expressly or impliedly authorises its agent to make a contract on its behalf, the contract is treated as being made between the principal and the buyer. The principal can sue and be sued on the contract, not as a third party, but as an unnamed principal party to the contract, and a selling shareholder cannot avoid liability to the buyer by claiming to be unnamed.

In order to avoid liability in a principal, agency relationship, restrictions should be placed on the agent’s authority by the principal, which will relieve the principal of liability against third parties who have or ought to have notice of the extent of the agent’s authority.

If notice is absent, the principal will not be able to avoid liability for the acts or representations of the agent which fall within the apparent scope of its authority.

To view the full judgement please click here.

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