Diplock LJ held the judge was right and the company was bound to pay Freeman and Lockyer for their architecture work.

[3] All those conditions were fulfilled on the facts, because (1) the board knew about Kapoor’s general activities and permitted him to engage in these kinds of activities; such conduct represented his authority to contract for these kinds of things (2) the articles conferred full power to the board (3) Freeman and Lockyer were induced to contract by these ‘representations’ and (4) the company had capacity.

An "actual" authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties.

Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties.

Nevertheless, if the agent does enter into a contract pursuant to the "actual" authority, it does create contractual rights and liabilities between the principal and the contractor.

In ordinary business dealings the contractor at the time of entering into the contract can in the nature of things hardly ever rely on the "actual" authority of the agent.

Under the doctrine of ultra vires the limitation of the capacity of a corporation by its constitution to do any acts is absolute.

Thus, if in the case of a company the board of directors who have "actual" authority under the memorandum and articles of association to manage the company's business permit the agent to act in the management or conduct of the company's business, they thereby represent to all persons dealing with such agent that he has authority to enter on behalf of the corporation into contracts of a kind which an agent authorized to do acts of the kind which he is in fact permitted to do usually enters into in the ordinary course of such business.

It must be shown: The confusion which, I venture to think, has sometimes crept into the cases is in my view due to a failure to distinguish between these four separate conditions, and in particular to keep steadfastly in mind (a) that the only "actual" authority which is relevant is that of the persons making the representation relied upon, and (b) that the memorandum and articles of association of the company are always relevant (whether they are in fact known to the contractor or not) to the questions (i) whether condition (2) is fulfilled, and (ii) whether condition (4) is fulfilled, and (but only if they are in fact known to the contractor) may be relevant (iii) as part of the representation on which the contractor relied...

In the present case the findings of fact by the county court judge are sufficient to satisfy the four conditions, and thus to establish that Kapoor had "apparent" authority to enter into contracts on behalf of the company for their services in connection with the sale of the company's property, including the obtaining of development permission with respect to its use.

The judge found that the board knew that Kapoor had throughout been acting as managing director in employing agents and taking other steps to find a purchaser.