4 Apparent Authority

Subject(s):

Apparent authority — Legal relations between principal and third party — Legal relations between agent and third party

This chapter highlights apparent authority or ostensible authority, which arises when a third party is induced to enter into a transaction with a principal by a party that appears to have authority to act but who in fact lacks such authority. It describes actual authority as a legal relationship between principal and agent that is created by a consensual agreement to which they alone are parties. It also talks about the illusion that can be created by the principal misrepresenting to third parties that the agent enjoys authority to perform certain acts. The chapter explains how apparent authority can arise in a variety of circumstances, suggesting that an agent may come to have apparent authority in several broad categories of situation. It refers to a principal that allows his agent to continue to appear as his agent after the agency has been terminated.