What types of authority can an agent possess?

An agent can possess actual authority and apparent authority, which are important concepts in agency law.

Actual authority refers to the power that the principal has explicitly granted to the agent, either through direct communication (express authority) or through the agent's reasonable belief that they have authority based on the principal's conduct (implied authority). For example, if a principal formally authorizes an agent to negotiate contracts on their behalf, that is considered express actual authority. If the principal allows an agent to act in a certain manner consistently, the agent may infer authority to act in similar situations based on that conduct.

Apparent authority, on the other hand, arises when a third party reasonably believes that the agent has authority to act on behalf of the principal due to the principal's representations or lack of action. Even if the actual authority is limited or non-existent, the principal may still be bound by the agent's actions if the third party acted in good faith and reasonably relied on the appearance of authority.

Understanding these two types of authority is crucial because it determines the extent to which a principal is liable for the actions of their agent. In the case where an agent exceeds their actual authority, if the third party reasonably believed the agent had the authority to act, the