The deputy judge decided that the fourth defendant would not have authorised his assistant to sign a contract of such magnitude without consulting his professional advisers and informing the first to third defendants, and that this led to the inescapable conclusion that the contract was a scheme to defraud the estate. He also decided that the claimant could not rely upon any representation by the fourth defendant as to his own authority, since the terms of the contract were so onerous as to put the claimant on enquiry.
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There is a warning here for contractors to beware of putting forward onerous contracts to mates in positions of responsibility in large clients on the assumption that they will be put in the back drawer (or, in this case, the safe) and forgotten about, and the proceeds milked out gradually through standing orders signed at intervals. An agent can only bind his principal if he has the necessary authority to do so, and if, as here, the apparent principal is himself only an agent, then the contractor risks appearing dishonest in the eyes of the law if he enters into a contract on excessively favourable terms through the agency of his mate. As for the principals themselves, perhaps the exploits of Mr Nick Leeson at Barings should by now have encouraged clarity in setting the limits of delegated authority.