Although a finance company may think it has limited the agency relationship between it and the supplier in a trading contract, ostensible authority may still arise to make the supplier the agent of the finance company for certain matters.
This was the position in CF Asset Finance Ltd v (1) Okonji, (2) Siaw and (3) Ishirosoft Ltd in which CF financed the hire of office equipment from the third defendant supplier. CF terminated the agreement following default in payment and obtained judgment. The customers appealed.

Their defence was that the supplier’s salesman (Y) had persuaded the customers to sign CF’s blank regulated hire agreement for the sole purpose of ascertaining whether they could obtain sufficient credit to enable the hire to go ahead. The equipment was delivered on 6 November 2006 and left at the premises despite the customers’ protestations to Y that they did not want it, had not agreed to hire it, and did not intend to enter into a hire agreement. Y had already submitted the proposal and the hire agreement was executed (and thus accepted) by CF on 9 November.

When the customers received a copy of the completed hire agreement they notified CF that the contract had been cancelled.
The customers argued that the hire agreement was not binding as any offer contained in the signed blank hire agreement was revoked on 6 November. They argued that Y was CF’s agent for the purposes of such revocation. There had therefore been no contract as there was no offer capable of acceptance.

The customers also relied on the defence of non est factum – the document signed was essentially different to the document that was intended to be executed. The argument was that it was intended solely to determine if credit could be obtained, and was not intended to be contractual. This fundamental misapprehension entitled them to disown the contract.
CF argued that Y was not its agent for the purpose of receiving notice of the revocation of the offer and, therefore, there had been no communication of such revocation before it was accepted.

The Court of Appeal allowed the appeal. The terms of the trading agreement between CF and the supplier created a limited agency between them for the purpose of introducing customers and submitting completed proposal forms only. However the court held that it was implicit from that that Y had at least ostensible authority to receive and communicate to CF any decision of the customer not to proceed before the proposal was accepted.

CF therefore had deemed notice of the intention not to proceed on 6 November and there was no offer capable of acceptance on 9 November.

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Given the finding on agency, the defence of non est factum did not have to be decided. The court did question, however, whether a mistaken belief as to the use to which the documents would be put where the nature of the document was fully understood, as here, was sufficient.

This was not a surprising decision. Managing intermediary relationships is increasingly important for motor finance companies in the post 1 April regulatory environment and given the findings of the Court of Appeal in cases such as Scotland v British Credit Trust Ltd and Plevin v Paragon Personal Finance Ltd.

If the Supreme Court upholds the wider interpretation of "on behalf of" in the unfair relationship regime under section 140 of the Consumer Credit Act 1974, finance companies can expect many more claims against them relating to acts and omissions of suppliers.

Greg Standing is a partner in Wragge Lawrence Graham & Co’s finamce litigation team