Also known as:apparent authority · apparent authority doctrine · ostensible authority
Written by attorneys · grounded in primary & secondary sources — see below
The power of an agent to bind a principal in transactions with third parties that arises from the principal's manifestations to those third parties creating a reasonable belief in the agent's authority. The doctrine protects third parties who reasonably rely on the principal's conduct even when the agent lacks actual authority.
Sources & Authorities· 12 primary sources
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Cases
Uniform Acts
Restatements
Casebooks
How it applies
Common Examples
6
Client Executes Trading Authorization
Coastal Capital supplied junior analyst Marilyn with business cards listing her as Associate Advisor and allowed her to attend client meetings without disclaimers. Client Mark met Marilyn at the firm's offices, received a discretionary trading authorization on firm letterhead that she signed, and transferred funds in reliance. When Coastal Capital later disclaimed the trades, the doctrine of apparent authority bound the firm because its manifestations created Mark's reasonable belief in Marilyn's authority.
General Partner Binds Limited Partnership
General partner Zenith Studio negotiated advertising contracts on behalf of limited partnership Dusk Studio. Third party Dawn Studio relied on Zenith's role and entered revenue-sharing deals. When Dusk Studio later refused payment, the doctrine of apparent authority made the limited partnership liable for Zenith's acts in the ordinary course.
Partner Commits Partnership to Services
Partner Marc signed a two-year services agreement with Black Life Sciences after the partnership agreed to dissolve but before any notice reached third parties. Black Life Sciences had no knowledge of the dissolution and relied on Marc's ongoing role. The doctrine of apparent authority bound the partnership to the agreement.
Lawyer Settles Litigation
Client Dorothy Daniels's attorney of record represented to opposing counsel that a settlement had been reached. Opposing counsel relied on the representation and prepared dismissal papers. The doctrine of apparent authority allowed enforcement of the settlement against Daniels even though she later claimed her lawyer exceeded actual authority.
Engineer Promises Service Terms
Network engineer Jack assured White Telecom of discounted rates and priority restoration for a fiber line. White Telecom purchased equipment in reliance on Jack's statements made in his customer-facing role at Maple Wireless. The doctrine of apparent authority did not bind the company because no principal manifestations created a reasonable belief that Jack could set pricing terms.
Partner Misapplies Funds
General partner Zenith Studio received advertising payments from Harbor Media on behalf of limited partnership Dusk Studio. Zenith misapplied the funds while acting with apparent authority. The doctrine of apparent authority made the limited partnership liable to Harbor Media for the loss.
Common questions
Frequently Asked
5
How does apparent authority differ from actual authority?+
Apparent authority arises from the principal's manifestations to third parties that create a reasonable belief in the agent's power, whereas actual authority stems from the principal's direct grant to the agent. The doctrine protects third parties who reasonably rely even when actual authority is absent or has been internally limited.
Supporting sources
Does a principal's internal suspension of an agent's authority end apparent authority?+
No. Apparent authority continues until the principal takes reasonable steps to notify third parties of the limitation. Third parties without notice may still reasonably rely on prior manifestations.
When does apparent authority allow enforcement of a lawyer's settlement?+
A lawyer of record is presumed to have apparent authority to settle litigation. Absent notice of limits, the opposing party may rely on counsel's representations, and courts enforce the settlement against the client.
Supporting sources
Does apparent authority bind a partnership for a partner's misapplication of funds?+
Yes. When a partner receives money or property while acting with apparent authority and then misapplies it, the partnership is liable for the loss to the third party.
Supporting sources
What manifestations by a principal create apparent authority?+
Written or spoken words or other conduct that, reasonably interpreted, cause a third party to believe the principal consents to the agent's acts on the principal's behalf. Business cards, letterhead access, and silent acquiescence during client meetings can qualify.
Supporting sources
, entered judgment in favor of respondent and against appellants Dean Witter and Company and its bonding agency, Firemans Fund Insurance Company, and against appellants Walston and Company,…
Business Associations Agency and PartnershipPower of agent to bind principal · Inherent agency powerUBEIntermediate