Don’t assume a trustee has the board’s authority to act

OUTSIDE parties that deal with a trust often assume the trustees have both the authority and capacity to enter into transactions binding the trust. If trustees have not ensured that these requirements are met, to what extent can these outside parties be deemed to have known?

In the instance of companies and close corporations, the courts have adopted a principle called the Turquand Rule, which provides that a contracting party, dealing in good faith, can assume that actions