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THE DOCTRINE OF APPARENT AUTHORITY IN ENGLISH LAW AND ITS APPLICATION IN APPROACHING VIETNAMESE CIVIL CODE 2015

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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
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

Supervisor
Student
Student’s code
Class

HO CHI MINH CITY
2017

Dr. Nguyễn Hồ Bích
Hằng
Đặng Hồng Nhân
1353801011152
CLC38B


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-doanhnghiep-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.

1


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.

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.
4

2


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.
2.1.

Literature review
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

6

Kenneth R. Williams (1973), Apparent Authority in a Civil Law Jurisdiction, Louisiana Law Review,
Vol.33, No.4, p.735.
7
In some common law countries, English precedents are either binding upon the courts there or of highly
persuasive value. For instances, in Singapore, English precedents has a strong influence on the decision of
Singaporean courts and are usually cited as highly persuasive source. See details in: Kevin Tan (1999), The
Singaporean Legal System, NUS Press, p.241. In Hong Kong, Article 84 of the Basic Law provides that the
Hong Kong courts may refer to case precedents from other countries under common law jurisdictions.

3


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


4


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 mustread 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.

Restatement (Second) of Agency and its successor Restatement (Third)
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

5


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

6


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.
4.
Research method
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.

7


1.1.

CHAPTER 1. AN OVERVIEW OF AGENCY AND APPARENT
AUTHORITY IN ENGLISH LAW AND VIETNAMESE LAW
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-throughapril-2006-copyright-2006-by-the-american-law-institute.html. (Last visited on 7 July, 2017).

8


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
other of whom similarly consents so to act or so acts‖.10
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.

9


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
manifestation” rather than “inner subjective thoughts”.15 Through their conduct or
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
them, either expressly or by implication from their words and conduct‖.17
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
which result from agency‖.18
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.

10


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
relationship by the making of contract or the disposition of property‖.19
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
authority”.20 His definition does not give any weight to the fiduciary and consensual
characters of traditional agency’s understanding. Instead, the power-liability theory
“seeks to unite the various instances of agency into a single formulation which
applies to each equally”.21 It focuses on the ability of the agent to affect the
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.
LS Sealy & RJA Hooley, supra note 16, p.99.
21
Id., pp.100-101.
22
Id., pp.99-100.
20

11


benefit of another person (hereinafter referred to as the principal) enters into and
performs a civil transaction within the scope of agency‖.23
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.
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.
24

12


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
27

Ibid.
Id., pp. 264-265.

13


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
a civil transaction‖.28
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.

14


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
the principal‖.30
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.
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.
30

15


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.
36
Roderick Munday and Roderick J. C. Munday (2010), Agency: Law and Principles, Oxford University
Press, p.1; Ho Chi Minh University of Law, supra note 24, pp.292-294.
37
The CC 2015, Article 139.1; Ho Chi Minh University of Law (2014), Giao trinh Phap luat ve hop dong va
boi thuong thiet hai ngoai hop dong, Hong Duc Publisher, p.293.


16


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

& Lockyer v Buckhurst Park Properties (Mangal) Ltd.42 The fact of the case is that:
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.
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.
39

17


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
principal liable to perform any obligations imposed on him by such a contract‖.43
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
authority to enter into negotiations or to make representations as his agent‖.44 and
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
manifestation‖.45 The definitions of Warren Abner Seavey and the Restatement
(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.
Kenneth R. Williams, supra note 6, p.735.
45
American Law Institute, supra note 8, Section 2.03.
44


18


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
cost of those precautions‖.50
46


LS Sealy & RJA Hooley, supra note 16, p. 114.
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.
47

19


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
the selection of agents”.51 Furthermore, it would cause a great and undesirable
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.
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.

52

20


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
example, where a man is forbidden by the law to speak against his own deed‖.56
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
Rama Corporation Ltd v. Proved Tin and General Investments Ltd,58 Justice Slade
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
that representation”.60 Estoppel by representation is created to protect only the
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
54

John Cartwright (2006), “Protecting Legitimate Expectations and Estoppel in English Law”, Electronic
Journal of Comparative Law, Vol.10.3, p.2.
55
Ewan McKendrick (2014), Contract Law: Text, Cases, and Materials, Oxford Universtiy Press, p.211.
56
Ibid.
57
Daniel S. Kleinberger, supra note 14, pp.34, 51-52.
58
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.

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