The doctrine of apparent authority in english law and its application in approaching vietnamese civil code 2015

In order to resolve this problem, the agency in the CC 2015 is evolutionarily re-defined as ―the situation where an individual or legal person hereinafter referred to as the agent actin

MINISTRY OF EDUCATION & TRAINING

HO CHI MINH CITY UNIVERSITY OF LAW

THE MANAGING BOARD OF SPECIAL TRAINING PROGRAMS

CIVIL CODE 2015

BACHELOR’S THESIS CIVIL LAW FACULTY ACADEMIC YEAR: 2013 - 2017

HO CHI MINH CITY

2017

MINISTRY OF EDUCATION & TRAINING

HO CHI MINH CITY UNIVERSITY OF LAW THE MANAGING BOARD OF SPECIAL TRAINING

PROGRAMS  ĐẶNG HOÀNG NHÂN

THE DOCTRINE OF APPARENT AUTHORITY IN ENGLISH LAW AND

ITS APPLICATION IN APPROACHING VIETNAMESE

CIVIL CODE 2015

BACHELOR’S THESIS CIVIL LAW FACULTY ACADEMIC YEAR: 2013 - 2017

DECLARATION OF AUTHORSHIP

I hereby declare that the thesis has been composed by myself under my supervisor’s guidance and, to the best of my knowledge, that the work has not been submitted, in whole or in part, for any other degree or professional qualification I also warrant that the work has not been published in any form, which, if otherwise, shall be against my will and deemed as a violation under the laws Except where due references have been provided on all supporting literatures and resources, I confirm that the work submitted is entirely my own idea

Ho Chi Minh City, 16 July 2017

INTRODUCTION 1

CHAPTER 1 AN OVERVIEW OF AGENCY AND APPARENT AUTHORITY IN ENGLISH LAW AND VIETNAMESE LAW 8

1.1 Theoretical approach of agency in English law and Vietnamese law 8

1.1.1 Definition of agency 8

1.1.2 Authority and different types of authority 14

1.1.3 Characteristics of agency 16

1.1.4 An introduction to the doctrine of apparent authority in English law 17

1.2 An overview of apparent authority in Vietnamese legislation 25

CONCLUSION OF CHAPTER I 29

CHAPTER 2 PRACTICAL APPLICATION OF APPARENT AUTHORITY IN ENGLISH LAW – POINTERS FOR PROPER APPROACH IN THE CIVIL CODE 2015 30

2.1 Representation in English law and implication for the understanding of “fault” in the CC 2015 in relation to apparent authority 30

2.1.1 Representation in English Law 30

2.1.2 Fault element in the Civil Code 2015’s approach to apparent authority and suggestions for Vietnam 40

2.2 Reliance in English law and suggestions for duty to inquiry in the Civil Code 2015’s approach to apparent authority 44

2.2.1 Reliance in English law apparent authority 44

2.2.2 The standard of “did not known or could not have known” in the CC 2015 in comparison with reliance in common law 51

CONCLUSION OF CHAPTER II 56

CONCLUSION 57

APPENDIX 1: LIST OF AUTHORITIES 58

APPENDIX 2: LIST OF VIETNAMESE CASES 64

INTRODUCTION

1 Rationale for the research

In 2011, a deputy director of SeABank, a joint-stock commercial bank in Vietnam, signed a 150-billion bank guarantee for the issuance of bond of Megastar.1

Relying on such guarantee, Vinaconex-Viettel (“VVF”) agreed to buy Megastar’s

bonds When the payment was overdue, Megastar was unable to conduct the payment, resulting in the fact that VVF came to SeABank for such loan SeABank refused to execute the bank guarantee by relying on Decision 693, an internal agreement which provided that such deputy director was only authorized to sign any bank guarantee which did not exceed VND 30 billion SeABank thus refused to be bound by that bank guarantee Was VVF supposed to be aware of the existence of such internal Decision at 693 and whether it has the right to assume the proper authority of the deputy director? Are we required by the law to take due care and inquiry into the internal regulation of a commercial bank when transacting with them or, in a less complicated but more frequent circumstances, are we obliged to inquire about the authority of the cashier when going to a convenient store? At that

time, the Civil Code 2005 (“the CC 2005”), which was the primary legislation

governing agency relationship, turned out to be a gray area in relation to such issue This case, albeit drawing an incredible controversy and public awareness, was just tip of the iceberg since it was far from rare in reality.2

Agency is widely understood as the situation where a person, called the

principal, extends his existence by conferring his power upon another person, called

the agent, to enter into transactions with a third party In the modern world, it is

hardly possible to imagine daily commercial operation taking place without the use

of agent Agency helps to eliminate the limitation on the capacity of traders, allowing them to conduct business or enter into contracts with less efforts and time From a director of a listed company to a cashier in a convenient store, the use of agent is so indispensable that people most of the time do not bother to question its

1 See more at: Nguyen Minh Duc, Nhan vien lam, doanh nghiep co phai chiu? (Do enterprises take responsibility for its employees‘ conduct?) http://www.thesaigontimes.vn/137686/Nhan-vien-lam-doanh-

nghiep-co-phai-chiu.html (Last visited 1st June 2017)

2 Do Van Dai (2013), Luat Hop Dong Viet Nam – Ban an va binh luan ban an, Volume 1, 4th edition, Chinh Tri Quoc Gia Publisher, pp.193-194

validity.3 Agency thus plays a significant role in our daily life while is likely to put contracting parties in certain degree of risk

The transaction entered into by the agent and the third party shall be binding upon the principal if the agent is acting within his authority In most of jurisdictions, the authority conferred upon the agent by the principal is divided into actual authority and apparent authority The latter describes the situation when the third party reasonably assumes that the agent has proper authority to contract with him Such assumption is protected by law for the sake of stability of commercial practice since business entities and their customers most of the time rely on apparent authority.4

In the corporate world, the role of apparent authority is deemed more important, and somewhat more challenging, since outsider contracting parties are most vulnerable due to the lack of information regarding the internal management rules of the corporate contracting party In this regard, the law must simultaneously protect the right of business entities to conduct their daily commercial operation through their authorized agents, whereas taking into account the rights and interests

of third parties After a long time of being ignorant of the existence of apparent authority, the Civil Code 20155 (“CC 2015”), as a result, takes a milestone step by

adding the doctrine of apparent authority, which is believed to strengthen the role of law of agency

Although the intake of other doctrine from another country with different legal family through legal transplant is not a new phenomenon in the past decades

in Vietnam, the understanding and application of those foreign-origin doctrine has never been easy In case of apparent authority, the challenge is more intensive since the CC 2015 just came into effect on 1st January 2017 and sub-law documents, as well as jurisprudence, to give directions for the new issues of such doctrine are not available Consequently, there is an urgent need to study this legal institution in the

CC 2015 to provide a comprehensive framework for practical application

3 Paula J Dalley (2011), A Theory Of Agency Law, University Of Pittsburgh Law Review, Vol 72, p 497

4

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; Andrew S Gold and Paul

B Miller (2014), Philosophical Foundations of Fiduciary Law, Oxford University Press, p 331

5 The Civil Code 2015 was passed by the National Assembly on 24 November 2015 and came into effect on

1 July 2017

Apparent authority is a popular doctrine in common law jurisdictions and owes its origin to the English legal system.6 Therefore, it is surely of significant use

to study how the doctrine is treated in English law for suggestions in Vietnam Justification for the choice of English law as a comparative subject is enhanced by the following reasons:

(i) Apparent authority is a legal doctrine which has a long-standing position in the history of English law Albeit well-developed, the doctrine is still subject to enhancement through case law and the inter-application of different common law countries7 to adapt with the invariably changing commercial business Therefore, the source for research into apparent authority in English law is immense and sustains the development of various legal systems in relation to this legal institution

(ii) For a new legal institution, it is of essence to scrutinize it through not only doctrinal approach but also its practical impact on civil transactions Since the doctrine of apparent authority is primarily formed through case law and legal research of highly publicist, the study of apparent authority in English law thus makes mammoth contribution to how the new legal institution should be construed

in the CC 2015 and applied in reality

For the above reasons, the topic of “The Doctrine of Apparent Authority in

English Law and its application in approaching Vietnamese Civil Code 2015” is

what the author choose to elaborate in his bachelor’s thesis

2 Literature review

2.1 Vietnamese materials

- The textbook “Giao trinh Nhung van de chung ve luat dan su” of Ho

Chi Minh University of Law provides a basic understanding of Vietnamese law of agency, from a characteristics of agency relationship to the establishment of authority under the CC 2005 The book does not provide the notion of apparent

authority, it yet serves as a tool for supporting the basic understanding of the author

in relation to the agency area and

- The book “Luat Hơp Dong Viet Nam - Ban an va binh luan ban an”

of author Do Van Dai: in this book the author points out the shortcomings of the institution of agency in the CC 2005 through practical judicial precedents and explains the need to adopt the doctrine of apparent authority into the new Civil

Code In his latest book “Binh luan nhung diem moi cua Bo luat dan su 2015”,

apparent authority is asserted to be adopted into the CC 2015 The former book also introduces the concept of apparent authority in Canadian legal system, it does not, however, provide guidance on the application of such new provisions Neither do these books clarify the components of apparent authority nor offer a fully explored comparative study with a common law country

- Article “Dai dien be ngoai nhin tu goc do phap luat dan su Nhat Ban”

of author Nguyen Thi Phuong Cham in Luat hoc Journal, No.6/2016 is one of few

published law journals that provides an analysis on the doctrine of apparent authority in the CC 2015, especially through the comparative study with apparent authority in Japanese Law The author raises her concern over whether the understanding of apparent authority in the CC 2015 is alike, or consistent, with that

of customary understanding and of Japanese Law Of particular note, the article suggests another approach other than fault-based and peculiarly applicable in the context of apparent authority in commercial and corporate practice

Although the doctrine of apparent authority has not been fully explored in Vietnam, these materials still play a significant role in forming the foundation of the fundamental knowledge regarding the law of agency so that the author can be inspired and proceed on the next research

2.2 International materials

Due to a long-standing history of development, law of agency in general and apparent authority in particular has drawn a great interest of academic scholar in common law system Their researches play indispensable parts in the contribution

to the author understanding of the topic The two most popular sources are books and law review Among these, it is worth mentioning the following researches:

- The book “Commercial Law: Text, Cases and Materials” of LS Sealy and RJA Hooley presents a “comprehensive and accessible guide” to the

understanding of commercial law in England With respect to law of agency, the most valuable reference is that the book provides two ways of defining agency, one

is consent-based approach and the other is based upon power-liability doctrine These approaches are studied with a view to justifying the recognizing of different types of authority, including apparent authority In relation to the application of apparent authority, this research covers a wide range of some specific characteristics of apparent authority, especially the pros and cons of the conventional view of English courts On that basis, the research provides a mandatory and reliable source of for studying apparent authority in English law

- The book “Commercial Law” of Eric Baskind, Greg Osborne and Lee

Roach provides a coherent and in-depth understanding of how law of agency is perceived in English legal system With respect to apparent authority, the book fully explored its components Especially, for the first requirements of the apparent authority to be established, namely the representation, the book instructs the reader

to study it by answering 4 questions: What must this representation indicate? From whom must this representation derive? How must the representation be made? When must the representation be made? Commentaries on judicial precedents in this book played a major role in the author’s perception of the development of apparent authority in English law

- The book “Agency: Law and Principles” fully analyses law of agency,

embodying the doctrine of apparent authority, through the case law and commentaries of common-law scholars In particular, the book deals with the operation of apparent authority in major commercial sectors This book is a must-read for those who are studying the concept of law of agency in general and apparent authority in particular in English law The book restricts its scope within the area of one jurisdiction and do not provide a comparative perspective with another jurisdiction, which the author of this thesis shall conduct

of Agency are two sets of collected principles issued by American Law Institute

These two versions are intended to clarify the prevailing opinion in the area of law

of agency standing in each period of time in the United States These Restatements reflect the intake of US law from the doctrine in English law and shows some major changes in comparison with the view of English courts Thereby the two

Restatements provides the author with a comparative perspective when studying apparent authority

- Article “Agency Law and Contract Formation” of Eric Rasmusen

advocates the conclusion that the law of agency, including the doctrine of apparent authority, is justified by the least-cost-avoider principle The principle is an effective assistant in providing justification for different types of authority, including apparent authority

The mentioned sources provides a basic understanding and application of law of agency and apparent authority in English law Unfortunately, none of these researches elaborates on the comparative study between the concept in English law and in Vietnamese law

3 Objective and delimitation of the research

The ultimate objective of this research is to fully explore the doctrine of apparent authority in terms of both theoretical basis and practical application in English law, thereby making suggestion as to the proper understanding and application of such institution in the CC 2015 In order to accomplish this objective, the author intends to go through two steps:

First, the author shall seek the doctrine’s definition and analyze the requirements for the establishment of apparent authority In each requirement, the author will go from its general characteristics to exceptions, and wherever possible, give comment on the approach of the scholars and judicial bodies

Secondly, on the basis of the findings in step one, the author shall attempt to adopt the English law’s application of the doctrine in interpreting the institution of apparent authority in the CC 2015

It is the intention of the author that the thesis shall be mainly confined to the doctrine of apparent authority in English law However, due to the worldwide influence of judicial precedents of English legal system upon other common law countries, the author also seeks to look beyond the territory of English law to study the doctrine in the United States and Australia, especially the three versions of Restatement of Agency Such reference should not be deemed as to shift the focus

of this thesis from English law

As the research elaborates on the doctrine of apparent authority, all contents which are related to agency by operation of law and actual authority shall be

restrictively In the event that such types of authority are mentioned, they only serve

as a mean by which the author endeavors to make a comparison between different types of authority and thereby shedding light on confusing issues

The research is confined to the following methods:

(i) Comparative method:

This method is mainly used in the following aspects: (a) Comparing the different doctrinal approaches of agency and apparent authority; and (b) Comparing the approach of common law and the CC 2015 into apparent authority The comparative method will be employed throughout the thesis

(ii) Analytical method:

Analytical method is used throughout the thesis and primarily used in Chapter II where the author studies the conditions for invocation of apparent authority through in-depth research into its components Analytic method embodies the task of studying case law in English legal system on apparent authority, as well

as commentaries of common law and international scholars

(iii) Analytical method shall be followed by synthetic method to produce the author’s opinions and suggestions for Vietnamese approach

5 Structure of the research

The research comprises of two chapters The first chapter contains a description of law of agency in common law jurisdictions, Vietnamese CC 2005 and Vietnamese CC 2015 The author shall attempt to explain the casual link between the perception of agency and the recognition of doctrine of apparent authority in English law and Vietnamese law The first chapter will also provide an overview of apparent authority in English law and two theoretical underpinnings of the doctrine The second chapter will go into details on the components and practical application of the doctrine in English law system Moreover, the author shall proffer personal suggestion on the clarification of apparent authority in the CC

2015

CHAPTER 1 AN OVERVIEW OF AGENCY AND APPARENT

AUTHORITY IN ENGLISH LAW AND VIETNAMESE LAW

1.1 Theoretical approach of agency in English law and Vietnamese law

The way agency is perceived has a great impact on at least two regards (i) the recognition of different types of authority and (ii) the underpinning theory of each type of authority Accordingly, it is advisable to fathom the foundation of agency before getting to know one of its large branches, which is the doctrine of apparent authority

1.1.1 Definition of agency

1.1.1.1 Definition of agency in Anglo-American system

Definition of agency is an ever-lasting debate among scholars all over the world Attempts have been made to proffer a satisfactory definition of such legal concept, but none of these seem to be considered successful in effectively dealing with the complexity of the concept’s nature Among these, the consent-based approach and power-liability approach are two most widely recognized theories when studying the definition of agency in the common law countries

a Consent-based theory and objective test

Consent-based definition of agency can be found in Restatement (Third) of

Agency and Bowstead and Reynolds on Agency, which are the two most renowned

projects on the law of agency in the United State and England respectively

Restatement (Third) of Agency defines agency as: ―the fiduciary relationship that

arises when one person (a ‗principal‘) manifests assent to another person (an

‗agent‘) that the agent shall act on the principal‘s behalf and subject to the principal‘s control, and the agent manifests assent or otherwise consents so to act‖.

8

8

American Law Institute (2006), Restatement (Third) of Agency, William S Hein & Company, Section 1

The research was published by the American Law Institute in 2006 American Law Institute comprises

“voluntary, non-official association of lawyers, judges and law teachers” Although the research is not

legally binding upon the US courts, it is a highly persuasive secondary source and frequently cited in cases related to agency law Full text of Restatement (Third) of Agency can be accessed via http://docplayer.net/4194796-Restatement-of-the-law-agency-restatement-third-of-agency-current-through- april-2006-copyright-2006-by-the-american-law-institute.html (Last visited on 7 July, 2017)

Bowstead and Reynolds’s approach in their well-known treatise9 on the law

of agency gives the definition of agency read as: ―the fiduciary relationship which

exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the

The two definitions give us an idea that agency is established if the following three elements are met: (i) The relationship between principal and agent must be a fiduciary one; (ii) There must be consent (or at least the act of manifesting consent) from both the principal and the agent; and (iii) The relationship must be made with

a view to affecting another relationship between the principal and the third party

The third element is barely studied with difficulty It means that a “purely

internal” agreement between the two persons that one will act for another and its

purpose is not to affect legal relationship between one of them and the third party shall not amount to an agency.11 However, the first two elements may be misleading From the above definitions, it is observable that the two definitions observe the concept of agency through the consensual and fiduciary characters

Consensual refers to the fact that the principal manifests his assent to the agent,

which allows the agent to act on the principal’s behalf,12

while fiduciary denotes

that the agent must act for the interest of the principal.13 Literally, if the agent acts beyond the consent of the principal or he does not act for the benefit of the principal, the relationship between the two parties is not agency and thus the act of the agent shall not be binding upon the principal

The complication of this approach is that it does not give a sensible justification to the concern if there exists agency when the situation fails to encompass the consensual or fiduciary characters In fact, the laws in a majority of jurisdictions recognize the concept of apparent authority or authority by ratification, under which the principal does not give actual consent to the agent

9

The book is known as “an essential reference source for all commercial practitioners; both barristers and solicitors” and “frequently cited in courts both in the United Kingdom and elsewhere in the Commonwealth”

10 William Bowstead, Peter George Watts, Francis Martin Baillie Reynolds (2012), Bowstead and Reynolds

on Agency, Sweet & Maxwell, Article 1

11 Roy Goode (2004), Commercial Law, 3rd edition, Penguin Group, p 164

12 Ibid

13 Warren A Seavey (1920), “The Rationale of Agency”, The Yale Law Journal, Vol 29, No 8, p.884

Scholars who follow such orthodoxy resolve this discrepancy by explaining that the consensual and fiduciary character refers to an objective standard.14 It

means that “consensual” should be discerned through the examination of “outward

words, the law can decide, or it depends on what has appeared in the eyes of the

reasonable third party, whether the principal has “consented” to the agent’s conduct

irrespective of whether the principal has truly conferred his rights upon the agent.16

This objective test has recently been recognized in English law as it is of major help in dealing with the doctrine of apparent authority, which shall be discussed in Section 2.1.1.5 of Chapter I Judicial precedents affirmed the

justification for the objective standard In Garnac Grain Co v H.M.F Faure &

Fairclough Ltd and Bunge Corporation, Lord Pearson, for instance, demonstrated

the justification for objective test by holding that: ―[t]he relationship of principal

and agent can only be established by the consent of the principal and the agent They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognize it themselves and even if they have professed to disclaim it The consent must, however, have been given by each of

In Branwhite v Worcester Works Finance Ltd., Lord Wilberforce quoted Lord Pearson and added that: ―[t]he significant words, for the present purpose, are

‗if they have agreed to what amounts in law to such a relationship‘ These I understand as pointing to the fact that, while agency must ultimately derive from consent, the consent need not necessarily be to the relationship of principal and agent itself …but may be a state of facts on which the law imposes the consequences

Even though the problem of consent-based definition of agency has been alleviated by the objective test, the risk of reliance on the consent-based definition

14 Daniel S Kleinberger (2008), Agency, Partnerships, and LLCs: Examples and Explanations, Aspen

Publishers Online, p.8

15 Ibid

16 LS Sealy & RJA Hooley (2003), Commercial Law: Text, Cases and Materials, 3rd edition, LexixNexis

Butterworths, pp.98; Daniel S Kleinberger, supra note 14, p.8

17 Gualtiero Procaccia (1976), “On The History Of Agency”, Tel Aviv University Studies In Law, Vol 2,

p.80

18 Ibid

should not be overlooked because objective test needs the interpretation from

judicial body, which is not clearly stated prima facie

b Power/liability-based definition

Unlike those definitions above, Fridman advocated the definition as follow:

―Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal‘s legal position in respect of stranger to the

The approach of Fridman is based upon the concept of power/liability

relationship, which is where ―an agent is invested with a legal power to alter his

principal‘s legal relations with others regardless of the principal‘s given

characters of traditional agency’s understanding Instead, the power-liability theory

“seeks to unite the various instances of agency into a single formulation which

principal’s relation with the third party, thereby avoiding the complexity of consensual character between the principal and the agent.22 However, the shortcoming of this explanation is that it seems to elude from the relationship between the principal and the agent In agency, there are two fundamental relations, one is the internal which is between the principal and the agent, and the other is the

external which is between the principal and the third party The term ―agency‖

firstly denotes the internal relationship and aims at dealing with the rights and obligations between the two parties, therefore, in the absence of fiduciary and consensual characteristics, the given definition fails to explain why and how the rights and obligation between the agent and the principal emerge

1.1.1.2 Definition of agency in the law of Vietnam

a The Civil Code 2005

Agency in the CC 2005 is defined as “the situation where an individual or

legal person (hereinafter referred to as the agent) acting on behalf of and for the

19

GHL Fridman (1996), The Law of Agency, 7th edition, LexisNexis Butterworths, p.11

20 LS Sealy & RJA Hooley, supra note 16, p.99

21 Id., pp.100-101

22 Id., pp.99-100

benefit of another person (hereinafter referred to as the principal) enters into and

On the one hand, the definition of agency in the CC 2005 is substantially identical with the approach of common law jurisdictions with respect to the followings:

First, given the terms “on behalf of” and “for the benefit of”, Vietnamese law

asserts the consensual and fiduciary respectively as core elements of agency.24

Second, Vietnamese law provides that in agency, the agent must “enter into and perform a civil transaction”, which indicates that a purely internal relationship

between the principal and the agent is not an agency relationship Instead, agency must be created with a clear vision that the agent shall come into a transaction with

a third party For example, X hires Y to be his driver Under this agreement, the task

of Y is to be responsible for X’s daily commuting This is not an agency

relationship because driving is not ―enter and perform a civil transaction‖ with a

third party.25

On the other hand, the discrepancy between Vietnamese law and common law jurisdictions is that whether the objective theory of agency is applied in Vietnamese law on agency remains somewhat inconclusive In this regard, the author’s position is that the CC 2005 does not adopt the objective standard test to scrutinize the consensual character because:

First, the phrase “within the scope of authority” is provided as a condition

for the existence of agency It gives rise to the inference that if a person is acting under the name of another person but without proper authority, the law does not render that relationship as agency Whereas in English law, even though a person is acting without or beyond the scope of his actual authority, he is still rendered as the agent of the principal if, through an objective test, he is reasonably belived to be acting on behalf of the principal

Second, according to Article 145.1 and 146.1 of the CC 2005, only acts

within the scope of authority can be binding upon the principal In case the third party enters into an agreement with an unauthorized person, this agreement can only

23

The CC 2005, Article 139.1

24 Ho Chi Minh City University of Law (2014), Giao trinh Nhung van de chung ve luat dan su, Chinh tri

Quoc gia Publication, pp.292-294

25 Do Van Dai, supra note 2, pp 264-265

be binding upon the principal if the principal agrees so or does not raise any objection In English law, the concept of apparent authority allows the third party to enforce the contract against the principal even if the principal neither expresses any approval nor give any sign of objection

Regarding the fiduciary concept, according to an author, the phrase “for the

benefit of” should not be understood as merely bringing benefits to the principal,

instead the agency relationship can also result in a certain degree of risk for the principal.26 He further proclaims that even if the agent is prima facie entering into

contract with a third party but later uses the benefit from the contract for personal interest, it should not affect the agency relationship between the principal and the agent.27 His approach seems to be in line with the objective standard test of common law countries when studying the consensual and fiduciary characteristics Unfortunately, given the literal meaning of Article 139.1, it is arguable that the CC

2005 still makes quite spacious room for such debate

b The Civil Code 2015

Since the objective test is not adopted as a legal foundation for the establishment of agency, the CC 2005 fell short to provide an efficient mechanism for the agency dispute, and thus placing room for the unpredictability and instability

in civil transactions In fact, the judicial practice in the area of agency may show a divergent discernment as opposed to the literal provision of the CC 2005 In the Judgment No 23/2011/KDTM-ST dated 30 September 2011, the dispute concerned

a contract for sale of goods The legal representative of the defendant authorized

Ms Thanh to act on behalf of the defendant in terms of all negotiations and contract execution with the plaintiff The plaintiff asserted that they already made a payment

to Ms Thanh for the contract performance, which the defendant refused to acknowledge The plaintiff sought to terminate the contract and compensation from the defendant The issue was whether there existed the fact that Ms Thanh already received the payment from the plaintiff and if so, whether such receipt was within the scope of authority of Ms Thanh That Ms Thanh received the payment was successfully proved based upon her signature on the confirmation letter In the latter

question, the court relied on the power of attorney, which provided that “Ms Thanh

26 Ibid

27 Id., pp 264-265

is entitled to contact any competent authority within the scope of her authorization,

to make and execute relevant documents, conducts all rights and obligations in accordance with the laws and takes all responsibilities for the above authorized acts”, to held that Ms Thanh was acting within her authority when receiving the

payment because the power of attorney did not require that the payment obligation must be conducted directly with the principal The court continued to emphasize that the failure of Ms Thanh to transfer the received money to the defendant was irrelevant since it was the internal management of the defendant and its agent

In this case, it was transparent that Ms Thanh when so conducted the act at issue did not act in the interest of the company However, the court still found that the agent was acting within the scope of her authority, which was a strong indicator that objective standard was somehow adopted there

Due to the lack of objective test of consensual and fiduciary characteristics result, there is somewhat discrepancy between the legislation and its practical application As the CC 2005 did not provide that there was agency when the agent acts beyond or without the authority of the principal, the principal easily relies on the lack of authority of the agent, which was unknown to the third party when they entered into the transaction, to refuse to be bound by the agreement made between the agent and the third party In order to resolve this problem, the agency in the CC

2015 is evolutionarily re-defined as ―the situation where an individual or legal

person (hereinafter referred to as the agent) acting on behalf of and for the benefit

of another person (hereinafter referred to as the principal) enters into and performs

The above definition is perceptive of the fact that the phrase “within the

scope of authority” has been excluded from the CC 2005’s definition, which implies

that the CC 2015 does not take into account if the agent is acting within the scope of authority or not This approach, in the author’s view, is appropriate and paves the way for recognizing apparent authority

1.1.2 Authority and different types of authority

Agency is used to extend a person’s ability to operate more conveniently and efficiently In order to do so, the principal must confer something on the agent,

28 The CC 2015, Article 134.1

which is authority In English law, the concept of ―authority‖ is distinct from the term ―power‖ as the former relates to a question of fact and the latter relates to a

question of law.29 Taking into account the objective standard test, English law classifies the authority conferred upon the agent into two fundamental types, namely: (i) actual authority and (ii) apparent authority

In the first concept, authority is created by an agreement, whether expressly

or impliedly, between the principal and the agent This concept of authority is clearly defined and its scope strictly conforms to the provision in the agreement between the principal and the agent In the latter, actual authority does not exist Rather, they are created by the principal’s words or conducts that make the third party reasonably believe that the respective agent has actual authority Apparent authority is held to be in line with the legal trait of agency that agency is not

necessarily constituted by contractual base As Justice Colman stated, ―Although in

modern commercial transactions, agencies are almost invariably founded upon a contract between the principal and agent, there is no necessity for such contract to exist It is sufficient if there is consent by the principal to the exercise by the agent

of authority and consent by the agent to his exercising such authority on behalf of

In Vietnam, agency is classified into two major types on the basis of method

of establishment, namely: (i) agency by authorization; and (ii) agency by operation

of law.31 In the former, the creation of agency results from the authorization by the principal, while the agency in the latter is created by decision from State competent authority (such as from a decision of a competent court to appoint the legal representative for a person),32 or by a constitution of a legal entity or by provisions

of law.33 The formality of agency by authorization is not necessarily made in a writing agreement, unless the sectorial law specifies otherwise.34 It is observable that the criterion for categorization in Vietnamese law does not take the view from

29 LS Sealy & RJA Hooley, supra note 16, p.114

30 Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174 (QB) 185

31 The CC 2015, Article 135

32 The CC 2015,Article 136.3

33

The CC 2015, Article 135

34 Article 562 and Article 564.3 of the CC 2015; Article 18.1 of Decree 04/2013/ND-CP providing guidance

on the Law on Notarization See more in Do Van Dai (2016), Binh luan khoa hoc nhung diem moi cua Bo Luat Dan Su 2015, 2nd edition, Hong Duc – Hoi Luat Gia Viet Nam Publisher, p.187

the common law jurisdictions However, in either agency by authorization or agency by operation of law, the CC 2015 to some extent, recognizes actual authority (expressly or impliedly) and apparent authority,35 which shall be analyzed

in Section 1.2

1.1.3 Characteristics of agency

Penetrating the meaning of the term agency, English law and Vietnamese law on agency may be divided in relation to some of its corners Nevertheless, both invariably consent on the following distinctive legal traits of agency:36

(a) There are three parties in agency: the principal, the agent and the third party The agent’s role is to act on behalf of the principal to enter into or to execute civil transactions with the third party, which means that when doing so, the agent is acting under the principal’s name and thereby creating rights and obligations for the principal.37 Accordingly, the law of agency governs the rights and obligations of three relations: (i) first, relation between the principal and the agent; (ii) second, relation between the agent and the third party; and (iii) third, relation between the principal and the third party In term of this legal trait, the CC 2005 and the CC

2015 meet the mind of jurisprudence from English law

(b) Agency is a consent-based relationship, as indicated by the event that the principal manifests his consent to be bound by the act of the agent It also denotes that when entering into contracts with the third party, the agent is not acting

35

Truong Nhat Quang (2016), Phap luat ve Doanh nghiep - Cac van de phap ly co ban, Dan Tri Publisher,

p.177 For expressly authority, its recognition by Vietnamese law is clearly discerned in Article 141.1 whereby the scope of authority of the agent is provided in either the legal entity’s constitution or content of the authorization For impliedly actual authority, it is when the power of attorney or the legal entity’s constitution does not clearly provide the detailed scope of authority For example, when the general director authorizes the deputy director to enter into a business contract, although the power of attorney does not clearly state which other rights the deputy is entitled to, for entering into a business contract, the deputy director has reasonable expectation that he is also entitled to conduct other transaction for the purpose of effectively executing the contract, such as hiring a lawyer to review the contract In that case, the act of hiring a lawyer falls within the scope of impliedly actual authority because it is deemed necessary for the main task In the sought for justification of impliedly actual authority, author Truong Nhat Quang suggests taking into account the provision of civil transaction interpretation which provides that in case the civil transaction is susceptible to more than one meaning, the transaction is interpreted in accordance with the common mutual intent of parties In such event, the mutual intent of the parties when the general director authorizes the deputy director may be interpreted as that the deputy director shall conduct all necessary works to perform the actually assigned task

under his own name but the name of his principal although they are two separate entities with his or her own assets.38 The reason why the agent can do so is explained by the fact that the principal manifest his consents to let himself to be bound by the agent’s act

(c) In agency, the agent must act for the benefit of the principal In case the agent acts without or beyond the scope of his given authority, the agent shall be obliged to perform the exceeded obligation with the third party, unless the third party knows or should have known that that person is not duly authorized.39

The difference between English law and Vietnamese law lie in the two latter traits In English law, the fiduciary and consensual characteristics are viewed through the objective test, which means that these characteristics shall not depend upon the subjective mind of neither the agent nor the principal They are manifested

by the principal and the agent’s outward conducts which make a reasonable third party actually belive that the agency relationship exists In Vietnam, the concept of fiduciary and consensual are found in both the CC 2005 and the CC 2015,40 as analyzed in Section 1.1.1.2 However, whether agency in the CC 2005 and 2015 are accompanied with the objective test is somewhat unclear and thus needs to be addressed by judicial body in the near future

1.1.4 An introduction to the doctrine of apparent authority in English law 1.1.4.1 Definition of apparent authority in English law

The first impression of apparent authority, as its name suggest is that it is an appearance of authority, which denotes that there exists no actual authority.41 The

notion of apparent authority is notably dissected in an English case named Freeman

Mr Freeman and Mr Lockyer (the Claimants) sued Buckhurst Park Ltd and its director, Shiv Kumar Kapoor, to claim unpaid fees for their architecture work on developing the Buckhurst Park Estate The company’s articles provided that all four directors of the company were needed to constitute a quorum Kapoor had acted

38

Ho Chi Minh City University of Law, supra note 24, pp.293-294

39 The CC 2015, Article 142.2, Article 143.2

40 The CC 2005, Article 139.1; the CC 2015; Article 134.1

41

Roderick Munday and Roderick J C Munday, supra note 36, p.59

42 For full holding of the case, please refer to

https://en.wikipedia.org/wiki/Freeman_v_Buckhurst_Park_Properties (Mangal) Ltd (last visited 1st June

2017) Eric Baskind, Greg Osborne and Lee Roach (2016), Commercial Law, Oxford University Press, p.97

alone and represented that he was a managing director while in fact he was engaging in the architects without proper authority The company argued it was not bound by the agreement The Westminster County Court held that the company was bound by the contract between the Claimants and Kapoor The Company appealed

to the Court of Appeal of England and Wales

The judgment is given in favor of the Claimants Justice Diplock found that

it was the apparent authority that binds the company to the contract made between

the agent and the third party He then defined the apparent authority as: ―a legal

relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted on by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the ‗apparent‘ authority, so as to render the

In this definition Justice Diplock affirmed two fundamental components of apparent authority, which were: (i) representation made by the principal; and (ii) reliance by the third party

Meanwhile, Warren Abner Seavey defines apparent authority as ―authority

resulting from conduct by the principal which causes a third party reasonably to believe that a particular person who may or may not be the principal's agent, has

Restatement (Second) of Agency provides that―[a]pparent authority is the power

held by an agent or other actor to affect a principal‘s legal relations with third parties when a third party reasonably believes that the actor has authority to act on behalf of the principal and that belief is traceable to the principal‘s

(Second) of Agency share the approach of viewing apparent authority as a concept

of authority

Albeit divided into different perceptions of apparent authority, most authors agree upon the conditions for the invocation of apparent authority, including: (i) representation from the principal: the principal, through his conduct, must make a

43 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

44 Kenneth R Williams, supra note 6, p.735

45 American Law Institute, supra note 8, Section 2.03

representation to the third party that the agent has been properly authorized to go into transactions; and (ii) reliance of the third party: the third party must rely on that representation to enter into the transaction with the agent In other words, there must be a causal link between the representation of the principal and third party’s dealing with the agent.46

According to some legal scholars, the conditions for invocation of apparent

authority also include ―the alteration of third party‘s position, which means that the

third party must act to his detriment when he relies on the apparent agent’s

representation‖.47 However, in the modern English law of agency, this condition is deemed unnecessary and reduced to the mere fact that the third party enters into contract with the agent.48

1.1.4.2 The justification of apparent authority

a Least-cost-avoider principle

Least-cost-avoider principle is a well-known justification for the doctrine of apparent authority.49 The principle can be simply construed that when an activity may result in losses, the need to reduce such losses comes up In that case, the society shall want to put the burden to reduce the losses on those who could have possibly managed to take effective precautions against them As an author puts it,

―Thus, in many situations, it makes no sense, after all, to expend two dollars on precautions against a loss if doing so only reduces those losses by one dollar Thus,

in many situations, it makes sense to impose liability on the cheapest cost avoider (i.e., the party who could have most cheaply taken precautions against the loss) Doing so gives that party an incentive to take precautions, while minimizing the

46 LS Sealy & RJA Hooley, supra note 16, p 114

47

Roderick Munday and Roderick J C Munday, supra note 36, p.84; Rama Corporation Ltd v Proved Tin

and General Investment Ltd [1952] 2QB 147, 149-50; George Whitechurch Ltd v Cavanagh [1902] AC 117, 135; Northfolk CC v Secretary of State for the Environment [1973] 1 WLR 1400

48 Roderick Munday and Roderick J C Munday (2010), supra note 36, p.85; M A Clarke, R J A Hooley,

R J C Munday, L S (2017), Commercial Law: Text, Cases, and Materials, Oxford University Press, p.145; Sarah Worthington (2016), Sealy and Worthington's Text, Cases, and Materials in Company Law, Oxford

University Press, p.113

49 Stephen Bainbridge (2014), Agency, Partnerships and LLCs, 2nd (Concepts and Insights Series), p.51;

Richard Freer, Douglas Moll (2013), Freer and Moll's Business Organizations (Concise Hornbook Series), West Academic, para.61; Eric Rasmusen (2004), Agency Law And Contract Formation, American Law and Economics Review, Vol 6, No 2, pp.369-409

50 Stephen Bainbridge, supra note 49, p.51

The fact that least-cost-avoider principle can justify doctrine of apparent

authority requires the assumption that in such cases, the principal shall be

considered as the least cost avoider because he is active in controlling his agents by

means of, inter alia, “better monitoring, clearer instructions and greater cares in

deterrent, especially in commercial world, if the laws continuously put contracting

parties in the necessity for conducting due diligence into any of their partners they

transact with

b Enhancement of stability and expectation of third party

In the event of actual authority, the existence and limit of such authority’s

scope can only be to the knowledge of the principal and the agent Even in the

highly developed digital world, the inquiry into such position is not so viable In

such case, hardly anyone would run the risk of getting into a contract with a person

without knowing whether he is duly authorized or not Further, it would be tempting

under those circumstances for the principal to go back to his promise when he

regrets what his agent has done The doctrine of apparent authority in this case is an

effective tool to protect the stability of business transactions by not allowing the

principal to abuse the re-assertion on the limit of his agent’s authority.52

In most civil law jurisdictions and international instruments, apparent

authority is deemed as the reflection of the prohibition of inconsistent behavior,

which is based upon a broader principle of good faith and fair dealing.53 This

provision is defended by the explanation that when entering into commercial

transactions, the last thing any business entity wants to encounter is the uncertainty

and unpredictability of such transactions in the event of breach Business entities

insist on being sure about what rights and obligations they have in the events of

breach so that they can choose to get into the transaction or not In that case,

apparent authority is an effective instrument in promoting the legal certainty and

predictability in commercial contracts

1.1.4.3 The legal underpinnings of apparent authority

51

Richard Freer, Douglas Moll, supra note 49, para.61

52 Andrew S Gold, Paul B Miller, supra note 4, p.331

53 Danny Busch, Laura J Macgregor (2009), The Unauthorised Agent: Perspectives from European and

Comparative Law, Cambridge University Press, pp.20-21

In English law, the underlying principle of apparent authority is contemplated in at least two theories, namely: estoppel by representation and objective contract theory/objective agency theory

a Apparent authority as a form of estoppel by representation

Estoppel is a legal doctrine of common law system and owes its origin to

English law Literally, the word estoppel means ―an obstruction‖.54 In legal sense,

it is defined as ―a mechanism for enforcing consistency‖,55 and described as ―an impediment or bar to a right of action arising from a man‘s own acts as, for

For a long time, apparent authority is called authority by estoppel,57 which gives rise to the inference that apparent authority owes its origin to this doctrine In

indeed held that ―[o]sensible or apparent authority… is merely a form of estoppel”

before establishing three so-called ingredients of estoppel: (i) representation; (ii) reliance on the representation; and (iii) alteration of third party’s position resulting

from such reliance In ING Re (UK) Ltd v R&V Versicherung AG,59 it was later

confirmed that apparent authority is a type of estoppel by representation

Estoppel by representation doctrine is simply put as that “a party who makes

a representation of existing fact to induce the other party to act to his detriment in reliance upon the representation may not be permitted to act inconsistently with

person who did the reliance, but not the person who manifest the representation.61

The approach of viewing apparent authority as a type of estoppel by representation is mostly advocated in English law, where the doctrine of estoppel is well-developed.62 However, this doctrinal base is subject to a lot of criticisms The

Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147; See more in:

Roderick Munday and Roderick J C Munday, supra note 36, pp.60-61

59 ING Re (UK) Ltd v R&V Versicherung AG, [2006] EWHC 1544 (Comm)

60

Ewan Mckendrick, supra note 55, p.224

61 Sean Wilken and Karim Ghaly (2012), The Law of Waiver, Variation and Estoppel, Oxford University

Press, p.93

62 Roderick Munday and Roderick J C Munday, supra note 36, p 61

rationale for the uncertainty and reluctance of rendering apparent authority as a form of estoppel can be best and commonly justified by the following reasons:

Firstly, the establishment of estoppel by representation requires “an

alteration of the third party‘s position resulting from his reliance on the

position must contain a detrimental consequences suffered by the third party.64 This

is deemed as an unnecessarily imposed requirement when the doctrine of apparent authority is relied upon The reason is that the role of apparent authority is to create

a legal rights and obligations to the principal when he enters into the contract with the third party through his agent, whereas the purpose of invoking estoppel is to seek compensation without the existence of any contract.65 Therefore, it seems futile to classify apparent authority in the same doctrinal group with estoppel by representation as doing so only puts an unnecessary burden of proof on the third party who does not in fact suffer from any damage and all he wants to do is to enforce the contract

Secondly, in case of estoppel, only the party acting to his detriment can rely

on the doctrine to seek compensation.66 In other words, if apparent authority is rendered as a form of estoppel by representation, it is an exclusive invocation for the third party The principal, as a result, cannot claim that there is a contract and then enforce it This is contrary to the purpose of apparent authority, which is to create a contract based on manifestation of consent of the principal

b Objective contract theory/Objective agency theory

Being aware of the aforementioned shortcomings of estoppel-based approach, modern English commentators are now turning their research to a more approriate base in dealing with the nature of apparent authority, which is the objective contract theory The traditional contract theory is that the core existence

63 Ibid

64

Sean Wilken and Karim Ghaly, supra note 61, p.95

65 In English and American Law, the contract is formed when there are four elements, namely: (i) offer, (ii) acceptance, (iii) intention to be legally bound and (iv) exchange of consideration In the context of estoppel, there is not any contract due to the lack of consideration Estoppel in this case serves a ground for seeking compensation if the third party relies on the representation of a person and as a result suffers detrimental consequences

66 Sean Wilken and Karim Ghaly, supra note 61, p.93

of a contract is ―based on the parties‘ consent to be bound‖.67 Under this theory, with respect to the agency, the principal is responsible for the act of his agent because he consents to be bound by his agent’s act when he elects that person to be his agent However, contract theory faces its limitation as to explain why the principal still takes responsibility for the act of agent when he does not actually authorize the agent to do so

The objective theory of contract manages to deal with this problem in a more thorough basis Under the objective theory of contract, the existence of a contract is

“determined by the legal significance of the external acts of a party to a purported

manifestation of the consent, not the consent itself that should be taken into account when determining the existence of a contract This objective approach has inspired

a number of scholars to turn to when choosing a more proper way to studying the law of agency,69 as discussed in Section 1.1.1.1, as well as apparent authority

The rationale why objective contract theory can be seen as a role model for

studying the law of agency can be best demonstrated by two reasons: (i) first, when

creating a principal-agent relationship, the sole purpose of the principal is to make a

contract, or at least he should have expected it to happen; and (ii) second, both law

of contract and law of agency are based on the element of consent While the contracting parties objectively manifest their consent through their offer, acceptance

or the exchange of consideration, the principal manifests his consent through his act

of appointing another person as his agent or putting such person in a position that makes the third party reasonably believes that such person has been duly authorized

Explaining the doctrine of apparent authority from the view of objective theory of contract finds its support mostly from scholars in the United States, and tends to be popular in English law recently where the estoppel-based approach still manages to be the dominant competitor.70 In the United States, the objective-theory-

67 Paula J Dalley, supra note 3, pp.506-507

68 Michael Conant (1968), “The Objective Theory of Agency: Apparent Authority and the Estoppel of

Apparent Ownership”, Nebraska Law Review, Vol 47, No 4, p 684

69 Michael Conant, supra note 68, p 684; Paula J Dalley, supra note 3, pp.506-507; J M Smits, Elgar Encyclopedia of Comparative Law, 2nd Edition, Edward Elgar Publishing, pp.45-46

70 Michael Conant, supra note 68, p.684

of-contract-based approach can be clearly perceived through Restatement (Second)

of Contract and Restatement (Second) of Agency Under the two Restatements, a

contract is defined as ―a promise or a set of promises for the breach of which the

law gives a remedy, or the performance of which the law in some way recognizes as

And a promise is ―a manifestation of intention to act or refrain from

acting in a specified way, so made as to justify a promisee in understanding that a

(Third) of Agency is commented to be wide enough to include ―types of conduct

Unlike estoppel-based approach, the objective basis of apparent authority is getting an increasing direct support.74 Resolving almost shortcomings of estoppel-

orientation trend, this justification of apparent authority requires “proof neither of

misrepresentation nor of change of position in reliance thereon, and conforms to

In Vietnam, both the estoppel and objective theory of contract/agency as legal doctrines do not officially exist Even though Article 134.1 of the CC 2015 strikingly supersedes Article 139.1 of its old version, the author believes that it is too ambitious to be affirmative that objective theory of contract/agency has been or shall be recognized by legislators and judges in Vietnam, especially if rationale keeps hardly being given in the court’s reasoning As a result, in all likelihood, the

CC 2015 falls short to provide legal underpinning for the application of apparent authority, which eventually leads to the fact that the new provision will be subject

to different and inconsistent interpretation by judicial bodies In light of that, the adoption of legal doctrine alongside with transplantation of a new institution from other legal systems should be taken into account In the author’s view, objective theory of contract/agency should be adopted in the guidance of the People’s Supreme Court or in the next amendment of the CC 2015 By doing so, the principal cannot in bad faith invoke his agent’s lack of proper authority to go back

71 American Law Institute (1979), Restatement (Second) of Contract, Section 1

72

Id., Section 2(1)

73 Paula J Dalley, supra note 3, p.508

74 Ibid.; Michael Conant, supra note 68, p.684;

75 Michael Conant, supra note 68, p.684

on his promise in case his act objectively manifests his consent to be bound by the act of the agent

1.2 An overview of apparent authority in Vietnamese legislation

It remains as an interesting question as to whether the law of agency in Vietnam recognized the doctrine of apparent authority In the author opinion, apparent authority exists, to some extent, in the CC 2005 Paragraph 2 of Article

588.1 of the CC 2005 on the termination of power of attorney, provides that “the

principal must notify the third party in writing of the termination of the power of attorney, in case the principal fails to do so, the agreement entered into with the third party is still valid, unless the third party knew or ought to have known that the

but not unusual in civil transactions Imagine that A authorized B to enter into contracts with C for several times When B is dismissed, which leads to the termination of A’s authorization in accordance with Article 588.1 of the CC 2005,

A does not inform B about the dismissal B falsely makes a representation that he is still acting on behalf of A and enters into another contract with C Does the contract made after B’s dismissal binding upon A?

According paragraph 2 of Article 588.1, due to A’s failure to inform C, the contract made after the dismissal is still valid against A It is presumed that the legislators of the CC 2005 protects the innocent belief of the third party because he, unless the circumstances give rise to his knowledge, could not have known about the termination of agency without A’s notice This situation is similar to the concept

of apparent authority in English law.77 However, it does contrast to the notion of agency definition that the agent must be acting within the scope of his given authority Also, the situation provided under Article 588.1 is exclusively applicable

in the event that agency at issue is contractual, which does not cover method of establishment agency relationship, for example when the scope of authority is provided in the legal entity’s constitution Consequently, the question of recognition

of apparent authority in the CC 2005 remains indecisive and leaves the suggestion

to its new version

76 This content is superseded by Article 569.1, paragraph 2 of the CC 2015

77 See more in Section 2.1.1.2.b

Unlike case law in English legal system or the two versions of Restatement

of Agency in the United States, apparent authority is not defined in the CC 2015

The CC 2015 recognizes the doctrine of apparent authority by setting forth the three circumstances under which the principal is bound by the act of his agent when the agent is acting without or beyond the scope of actual authority The adoption of apparent authority into the CC 2015 is confirmed by the following provisions:78

―Article 142 Consequences of civil transactions entered into and

performed by unauthorized persons

1 A civil transaction entered into and performed by an unauthorized person shall not give rise to rights and obligations with respect to the principal, except in one of the following cases:

(c) The principal is at fault, resulting in the fact that the transacting person did not know or could not have known that the person who entered into or performed the civil transaction with him or her was unauthorized

Article 143 Consequences of civil transactions entered into and performed

by representatives beyond scope of representation

1 A civil transaction entered into and performed by a representative beyond his or her scope of representation shall not give rise to rights and obligations of the principal with respect to that part of the transaction which exceeded the scope of representation, except in one of the following cases:

(c) The principal is at fault, resulting in the fact that the transacting person did not know or could not have known that the person entered into or performed the civil transaction with him or her beyond the scope of representation‖

The adoption of apparent authority is a positive and appreciable step of Vietnamese legislators It is expected to settle agency-related dispute as well as to resolve the discrepancy between the legal institution of agency in Vietnam and international practice However, it follows the orthodoxy that Vietnamese regulations are not familiar with such common law concepts of apparent authority

as representation and reliance Instead, the CC 2015 takes fault from the principal and standard of “did not know or could not have know” from the third party as

ingredients of the same doctrine in Vietnam Due to a long time of ignoring the

78 Do Van Dai, supra note 34, pp.193-194

concept of apparent authority in the agency area, this sudden supplementation and the lack of doctrinal foundation for the understanding of such particular institution

in the CC 2015 are likely to create a tremendous confusion in practical application There is even a concern that whether the newly adopted provisions under Article 142.1(c) and 143.1(c) reflect the adoption of apparent authority or not.79 Hence, it is

no doubt that further steps should be taken to seek the underlying policy of such legal institution, both from the experience of common-law-based countries as well

as in the context of Vietnamese law Judging by the text of the provisions in the CC

2015, at least two questions emerges to call for explanation from sub-law documents or jurisprudence from Vietnamese courts, namely:

(i) What constitutes the fault of the principal which results in the third

party’s unawareness of the lack of authority from the apparent agent ?

(ii) Given the phrases “did not know” or “could not have known”, what

are the requirements for the third party’s awareness of the agent’s actual authority?

Regarding the fault element, in a most usual sense, it is a wholly based element in determining damages caused by a person In term of agency, the legal issue is when third parties rely on Article 142.1(c) or 143.1(c) to enforce the contract, must they prove that they have suffered from a detrimental consequences resulting from the principal’s fault? As fault is not defined in the CC 2015 for the purpose of inducing another party into contracts but for seeking damages, it can be arguable that the legislators’ idea under these provision somewhat coincides with estoppel-based approach of English law However, since estoppel does not exist in the CC 2015, one may be remarkably reluctant to justify that assertion

For the “did not know or could not have known” standards as the remaining

element under Article 142.1(c) and Article 143.1(c), the legal issue is to what extent the legislators intends to require third parties to take due diligence into their contractor’s due authority? Article 141.4 of the CC 2015 requires that the agent must inform third parties of their actual authority but it fails to reveal the legal consequence for failure to do so Also, literally, whether the duty to notice is unduly complied or not does not put any impact on the duty to inquiry, because it seems

that the third party is legally required to take some actions given the phrase “could

79 Nguyen Thi Phuong Cham (2016), Dai dien be ngoai nhin tu goc do phap luat dan su Nhat Ban, Luat Hoc Journal, No.6/2016, p 86

not have known”.80 It, therefore, remains vague as to the new regulation on agency and needs to to be addressed by reference to another legal system

In light of the above, the concept of apparent authority is not clearly discerned in the CC 2015 and most of researches on law of agency in Vietnam have not shed light on this area, the author shall endeavor to offer his approach, following a comparative perspective between English law and Vietnamese law, which shall be dissected in the next chapter

80 In judicial practice, courts usually, expressly or impliedly, take the view that third parties have duty to conduct due inquiry into the agent’s authority For example, in the judgment No 22/2006/KDTM-PT dated

22 March 2006 of the Court of Appeal of the People’s Supreme Court based in Ho Chi Minh City, the court

held that ―…the fact that the head of the Da Nang integrated materials company‘s branch signed the contract for loading was not duly authorized and there was no power of attorney from the General Director

in accordance with the company‘s internal regulations and Article 92.4 of the CC 2005‖ The holding gives

rise to an assumption that the court shall take into account the company’s internal documents See more in:

Do Van Dai, supra note 2, pp.288-289

CONCLUSION OF CHAPTER I

After a thorough dissection of law of agency and the doctrine of apparent authority in English law and Vietnamese law, the author leaps to the conclusion that:

Agency is a legal institution which has a long-standing history of existence and development Although there are differences in each jurisdictional approach, agency is deemed as an aspect of law governing the triangular relationship between principal, agent and third party It is widely recognized as a consent-based and fiduciary-based relationship and these legal traits shall be examined through an objective test which is manifested by the principal-agent’s conduct as opposed to their inner thought

Regarding the doctrine of apparent authority, it is a legal institution which exists in common law system In English law, whether apparent authority is a form

of estoppel by representation or is based on the objective theory of contract law is controversial with an increasing research in support of the latter view Apparent authority is justified by the least-cost-avoider principle, which means that those who possess a more effective tool to take precaustions agaisnt the loss should take action

to prevent it Also, apparent authority is deemed as a legal institution that accelerates the stability and expectation of third parties

In Vietnam, it was not until the birth of the CC 2015 that apparent authority was officially recognized in Vietnam On the one hand, the fact that the CC 2015 adopts the doctrine of apparent authority is a positive movement On the other hand, the approach of the CC 2015 with respect to apparent authority needs further clarification and guidance for practical application

CHAPTER 2 PRACTICAL APPLICATION OF APPARENT AUTHORITY

IN ENGLISH LAW – POINTERS FOR PROPER APPROACH IN THE

CIVIL CODE 2015

Elements constituting apparent authority in English common law comprise

representation and reliance In this Chapter, the author shall proffer practical

perspectives of these elements via judicial precedents in English law and, where it may be, other common law jurisdictions influenced by English law

2.1 Representation in English law and implication for the understanding of

“fault” in the CC 2015 in relation to apparent authority

2.1.1 Representation in English Law

It follows the orthodoxy that in the process of determining the existence of representation, two substantial questions need to be addressed:81 (i) the attribution

of representation, which denotes that from whom this representation must derive; and (ii) the methods of creating representation These issues shall be consecutively scrutinized in this Section

2.1.1.1 The attribution of representation

a Orthodox doctrine

From whom the representation must derive is not a contentious matter judging from the literal definition of apparent authority set out in both Restatement

(Third) of Agency and Freeman and Lockyer v Buckhurst Park Properties

(Mangal) Ltd As its definition already clearly suggests, it is the principal that the

representation comes from.82 Traditionally, English commentators do not take up the view that the agent could make the representation himself because it would otherwise allow the agent to self-authorize,83 as Lord Donalson MR describes as “to

and re-affirmed in Freeman and Lockyer v Buckhurst Park Properties (Mangal)

Ltd:

81

Eric Baskind, Greg Osborne and Lee Roach, supra note 42, p 94

82 Ibid.; Roman Tomasic, Stephen Bottomley and Rob McQueen (2002), Corporations Law in Australia,

Federation Press, p 217

83

Attorney General of Ceylon v Silva 1953] AC 461, [1953] 2 WLR 1185

84 United Bank of Kuwait v Hammoud [1988] 1 WLR 1051 (CA) 1066; M A Clarke, R J A Hooley, R J

C Munday, L S Sealy, A M Tettenborn and P.G Turner (2017), Commercial Law: Texts, Cases and Materials, 4th edition, Oxford University Press, p.139