Ending Apparent Authority

Ending Apparent Authority

A lawyer can lose actual authority in one private conversation, but opposing counsel was never in the room. That gap controls how apparent authority ends. Under § 8, apparent authority arises "from and in accordance with the other's manifestations to such third persons," so it lasts only as long as those manifestations can support a belief that the lawyer is authorized.¹ Two short rules follow. Termination of actual authority does not by itself end apparent authority, and apparent authority ends when it is no longer reasonable for the third party to believe that the agent continues to act with actual authority.²

The first rule exists because an inference of apparent authority may rest on the lawyer's earlier actual authority. Opposing counsel formed a belief from the way the client held the lawyer out, and a private discharge does not touch anything counsel saw. It may therefore be necessary for the client to give notice of the termination to third parties who dealt with the lawyer, or who otherwise continue to believe the client has authorized the lawyer to act.³ The client created the appearance and alone knows it has been withdrawn. The outsider cannot see a discharge that was never announced.

The second rule marks where the client's burden stops. Once a third party has been told of the discharge, or otherwise has reason to doubt the lawyer's authority, the belief is no longer reasonable and the client is protected.⁴ The protection also runs only to outsiders who behave as the doctrine assumes. In a dispute between Transmutual and Green Oil, the principal was bound under apparent authority only toward third persons who incurred a liability in good faith and without ordinary negligence. The court agreed that Green Oil was negligent for issuing a GreenPlus credit card to the agent without independently verifying her authority.⁵

The same rule operates in an ordinary business setting with no lawyer in sight. P runs a restaurant and tells A to order supplies from TP. Each week A orders and P pays. After several weeks P tells A she may no longer order from TP, but A does so anyway. P is bound to pay, because P's history of paying for A's orders is a manifestation to TP that A can bind P. If P wants to cut off that authority, she should inform TP that A can no longer bind her.⁶ A lawyer who has spoken for the client to opposing counsel or a counterparty throughout a matter has built the same kind of history. That history lasts until the other side learns it is over.

Documents make the problem harder because they outlast the discharge. A letter of authorization that the client placed in the lawyer's hands is the client's manifestation, and the lawyer can display it to anyone. A principal who hands over such papers bears the risk of getting them back after terminating the agent's authority. For that reason, a principal may do well to date these documents and state on their face the period during which they remain effective, subject to renewal or reissue at the principal's choice.⁷

Bar examiners test the same ideas transaction by transaction. One problem asks whether Bryan Carr is liable as cardholder for purchases his father Henry made on Bryan's account, and it turns on whether Henry had actual, implied, or apparent authority for each group of purchases. The examiners warn that each group may come out differently depending on its facts.⁸ The lesson for ending authority is to test every transaction on its own. Ask whether the outsider's belief in the agent's authority was still reasonable at that moment.

Exam problems usually test the split between the first two steps. Revocation works on the relationship between client and lawyer, and notice works on the relationship between client and third party. A client who completes only the first has protected against nothing the third party can see.