The articles of Shirika Company Ltd. provided that the directors had power to determine who should be entitled to sign contracts and documents of behalf of the company. One director Chapu Chapu, describing himself as the Chairman and without having been so authorized, executed and gave guarantee to Chafua in the name of the company. Shirika Company have found out about the guarantee executed and have refused to honour it as demanded by Chafua. Explain whether Shirika Company Ltd. is liable with regard to the demands by Chafua.

• This problem is based on the rule in Turquands Case.
• The articles of Shirika Company Limited are emphatic that directors have the power to determine who should sign contracts and other documents of the company.
• Evidence shows that Chapu Chapu one of the directors purporting to be the chairman executed a quaranted to Chafua and Shirika Ltd has after discovery of the state of affairs refused to honour the quaratnee. Question is whether Shirika Company Limited is liable.
• Shirika Company Ltd is liable for the following reasons:
– Chapu Chapu, a director represented himself as Chairman and purported to do what a chairman ordinarily does.
– The company is estopped from denying the representation.
– Chafua was not obliged to satisfy himself that Chapu Chapu was the elected chairman.
– This position is consistent with the decision in Freeman and Lockyer V. BackhurstPark Properties Ltd. whose facts were substantially similar.

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