As Lindi is fired for making unauthorised promises, Christopher Davies ponders staff who pledge more than their firm can deliver.

Christopher Davies, professional support lawyer, Halliwells

Team work was for once not the main issue in the show as the candidates demonstrated that they could carry out this week’s task of selling ice cream without the usual bickering. Both teams did well as a result. 

Lucinda’s team had been confident and had appeared to be a winning position until Claire’s team made an important big sale right at the end of the day to a restaurant. 

It was that final sale that separated them in the board room so it was one of Lucinda’s team that was facing being fired. In previous weeks it has been the team leader that has paid the price for failing, but this week Sir Alan found that the sales people in the team were most at fault and that their unauthorised promises of exclusivity to potential customers could not go unpunished.

The nominated head of sales for the project was Lindi and so it was she that was fired.

The decision to fire the person responsible for the unauthorised exclusivity promises shows how serious this issue can be in a business situation. Where an employee makes an unauthorised promise to a customer or client it can lead to some very serious complications for the employer. 

Oral contracts can be legally binding and employers can be bound by the actions of any employee who either has the authority to make the representations or is held out by another as having the authority capable of binding the company.

There would clearly be a dispute as to the validity of the agreement but if it could be shown that it was reasonable for the other party to assume that the individual employee had authority, even if this has not been expressed by the company, then the likelihood is that the agreement will be enforceable. For example, if a company deals with the managing director of an organisation then even if for some reason the MD did not have actual authority to bind the company in the circumstances it would be reasonable for the contracting party to assume they could.

There may be other job titles where it is obvious that the individual does not have the authority to bind the company. A 'junior', 'assistant', or 'trainee' will not carry the same ostensible authority as the head of global sales, senior manager or director of finance.

The test for determining ostensible authority is an objective one. Factors such as the seniority of the individual will be relevant, as will the context in which the agreement was made. In order to limit these problems businesses should ensure that arrangements with suppliers make it clear that instructions can only be accepted from specific people, or a specific level of employee role.
 
From an employment law perspective, the employer should take steps to ensure that all staff are aware of the limitations of their own authority to bind the company, and that they are also set clear limits to their authorised negotiating power or spending power. In circumstances where employees deliberately or recklessly exceed that authority then appropriate disciplinary proceedings should follow. Depending on the circumstances this may be a situation that could justify dismissal of the employee on grounds of gross misconduct.