One set of papers, and two different kinds of knowledge

The problem is stated almost like a fact pattern in an exam. Gap uses Company A's order forms and related documents, and places large raw-material orders with Company B and with Company C, as orders for A. The question is whether A can be made to answer for those orders. B and C may claim that Gap had authorized agency; if that is not recognized, they may claim apparent authority. A may answer that Gap had no authority, and, if authorized agency is found, that Gap abused the authority he had.

The facts then split the two suppliers. B already knew that Gap was in trouble and that a disciplinary process was under way. C did not know this. That is the hinge. Apparent authority depends, among other things, on whether the other party had a just reason to believe that authority existed, and on whether they were careless in coming to that belief. A supplier who already knows that an employee is in mid-discipline is not standing in the same light as a supplier who does not.

Three doors, and a verdict that account does not close

For authorized agency, the account lists three requirements: the fact that authority was granted; the fact that the agent performed a juristic act with the intention of acting as an agent; and the disclosure — under Civil Act Articles 114 and 115 — that the act was for the principal, which the other party knew or could have known. For apparent authority under Article 126, three further points are set out. A basic agency authority must already exist; if there was never any authority, this article does not apply, and case law as cited here says that authority over mere factual acts is not, in principle, enough. The agent must have gone beyond that authority, generally making it clear that the act was for the principal; a disposition by a person who is simply not a right-holder is not an agency act, and so does not give rise to this form of apparent authority. And there must be a just reason: the other party believed, at the time of the act, that the agent had authority, and was not at fault for that belief. Possessing the principal's seal certificate and a full set of papers may be such a reason. If the other party is a bank or similar institution that can easily confirm the grant of authority with the principal, they may have a duty to check.

Article 129 covers a different appearance: that authority, once granted, still continues. Its extinction cannot be asserted against a good-faith third party, unless that party failed to know through negligence. If no agency is found at all, Article 135(1) gives the other party a choice against the unauthorized agent: demand performance, or demand damages. Performance, here, means the same obligation the principal would have owed if the act had taken effect for the principal. The account lays those doors out carefully. It does not, in the source we have, walk through a finished verdict for B and a different one for C.

Sources

1. A commercial-law case on whether Company A is liable for raw-material orders placed with two suppliers by a man using A's papers, walking through authorized agency, apparent authority under Civil Act Articles 126 and 129, and unauthorized agency.

Last updated: 14 November 2026