Sections of the Corporations Act you may have missed - s128 and s129

Lizzie Brown

Why ss 128-129 matters more than you think  

Companies love to argue “they had no authority”. Courts rarely love that argument back. Sections 128 and 129 of the Corporations Act 2001 (Cth) are designed to protect people dealing with companies. They stop companies from hiding behind internal rules after the fact.  

The problem ss 128-129 solve 

Outsiders cannot see into a company. They do not know what board resolutions exist. They do not know who signed what internally. They rely on appearances. Importantly, ss 128-129 accepts this commercial reality. 

Section 128 says a person is entitled to make the assumption under s 129 unless they knew, or suspected the assumption was wrong.  

Most importantly, s 129(3) allows an outsider to assume that: 

• a person held out as an officer or agent has been properly appointed; and 

• that person has authority to exercise the powers customarily exercised by someone in that role. 

Therefore, if a managing director negotiates contracts, you can assume they have authority to do so. If an employee routinely deals with suppliers, you can assume they are authorised to deal with you. You do not need a board minute. 

A common mistake is to focus on who signed the document. 

Authority is often created through what a company does in practice, rather than what appears in its internal paperwork or board minutes.  

A company allows a person to manage the relationship. That person negotiates terms, sends correspondence, approves invoices, and deals directly with the counterparty. Those actions occur openly and repeatedly, without correction or intervention from anyone else within the organisation. Over time, that conduct sends a clear message. The company is presenting that person as having authority. 

The work is performed. The company accepts the benefit of that work. Payments are made, or at least processed, in accordance with the arrangement. At no point is authority questioned or limited. When a dispute later arises, courts do not ignore this history. Repeated dealings, silence, acquiescence, and acceptance of benefits are all powerful indicators of authority. They form the factual foundation on which both implied actual authority and ostensible authority are commonly established.  

A company cannot accept the benefits of an arrangement while later denying the authority that allowed the arrangement to exist. 

When assumptions fail 

Sections 128–129 are generous, but they are not a free pass. 

They will not help someone who actually knew the person lacked authority.

They will not rescue bad faith.

And they will not reward a party who saw the red flags, noted them carefully, and then drove straight past anyway.  

That said, the bar is not perfection. A company cannot escape liability simply because its internal processes were messy, unclear, or poorly enforced. Carelessness by the company is not a defence. It is usually the problem. 

The takeaway 

If a company sends someone out to deal with the world, the world is entitled to assume that person can, in fact, deal. 

Sections 128–129 reflect a simple commercial idea: companies are bound by the way they choose to present themselves, not by the internal rules they remember only once things go wrong. 

Courts enforce that principle. Consistently. And without much sympathy for after-the-fact explanations.