Stephen Bauld's latest Procurement Perspectives column looks at how municipalities are a particular form of corporation.
Like all corporations, municipalities must act through agents if they are to act at all.
The principle of apparent authority may be summarized as follows: Where a person by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was representation to have, even though he had no such actual authority.
These principles are substantially qualified in the case of a municipality. There is no rule in municipal law akin to the indoor management rule, as codified in legislation such as s.19 of the Ontario Business Corporations Act. One of the most important cases was the decision of the Supreme Court of Canada in The Waterous Engine Works Co. V. Palmerston.
A contract was signed and entered into under the corporation seal of the plaintiffs and of the defendant municipality for the construction of a steam fire engine. The town received the engine on June 19, 1890. On July 21, a resolution was passed by the council that all negotiations with the plaintiffs for the purchase of the engine be dropped, and that the plaintiffs be notified to remove the engine from the town hall.
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