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Appearance of Power of Representation

A representative can legally bind the principal unless the representative has exceeded the limits of his representative authority. However, a counter party may justifiably rely on authority of the representative when this reliance is caused by a statement, act or omission of the principal. According to consistent case-law, from the Supreme Court, the appearance of authority to represent can also be based on facts and circumstances that have occurred after the agreement has been entered into.

A government official entered into an agreement, a settlement agreement, whilst he was not authorized to do so. After the agreement had been entered into, the government entity paid for the legal procedure pertaining to the agreement and appeared in the following court proceedings. The counter party claimed that therefore he could justifiably rely on the authority of the representative to enter into the agreement on behalf of the government entity. The lower courts ruled that these circumstances could not have created the appearance of having power of representation, because they did not occur until after the agreement had been concluded.

However, the Supreme Court ruled that the appearance of authority to represent may also be based on facts and circumstances that arose after the conclusion of the agreement. It is important, therefore, that when a non-authorized representative has entered into legal acts on behalf of a party, also thereafter that party should refrain of any acts, statements or omissions that could create the appearance that such representative was authorized after all.