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apparent authority

Apparent authority is the power of an agent  to act on behalf of a principal , even though not expressly  or impliedly  granted. This power arises only if a third party  reasonably infers, from the principal's conduct, that the principal granted such power to the agent.  The idea of apparent authority protects third parties who would otherwise incur losses if the agent's signature did not bind the principal after reasonable observers thought that it would. Typically, if an agent has apparent authority, the agent's principal will be held liable  for the actions of the agent which are within the scope of the apparent authority.

Agency Law

The doctrine of apparent authority comes up often in agency law . In American Soc'y of Mech. Eng'rs v. Hydrolevel, 456 U.S. 566 (1982) , the Supreme Court upheld apparent authority as a legitimate doctrine under agency law, holding , "Under general rules of agency law, principals are liable when their agents act with apparent authority . . . An agent who appears to have authority to make statements for his principal gives to his statements the weight of the principal's reputation” -- in this case, the weight of petitioner's acknowledged expertise in boiler safety.

Power of Position

The "power of position" refers to apparent authority that is created by appointing someone to a position which carries recognized duties (i.e. manager or treasurer). In this situation, there will be apparent authority to do the things which are regularly and typically entrusted and expected of someone with the position title. In New York, this principle was explicitly upheld in Pasquarella v. 1525 William St., LLC, 120 A.D.3d 982 (N.Y. App. Div. 2014) , when the New York Appellate Division held that the manager of a company has the apparent authority to bind the company to contracts , regardless of whether he has actual authority.  

Even if the principal has expressly placed limitations on the agent's abilities, but these limitations are not known, then the agent will still have the apparent authority to do those things. 

[Last reviewed in June of 2022 by the Wex Definitions Team
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Keywords

• business law

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• AGENCY LAW

• Agency

• fiduciary duty

• FIDUCIARY LIABILITY

• fiduciary relationship

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