An agreement of acknowledgement of a debt and compromise was executed vis-à-vis a company when on behalf of the company signed the father of the shareholders. The Company later contended that the signatory was not authorized and the agreement does not bind it.
The Supreme Court held that an act committed vis-à-vis a third party by exceeding authority or without authority, when the third party did not know and need not have known of that (apparent authority) will be valid. An organ who acted without authority and knew or should have known of the lack of authority, the company may later sue such organ. In this case the other side apparently knew or should have known of the lack of signatory rights and thus the compromise agreement does not obligate the company.