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Agency • Liability of Principal for Agent's Contracts
AG#012
Legal Definition
An agent has actual implied authority where the principal, through conduct or circumstance, gives the agent authority.
There are typically three ways a principal gives such authority: (1) necessity, (2) custom, or (3) prior acquiescence by the principal.
There are typically three ways a principal gives such authority: (1) necessity, (2) custom, or (3) prior acquiescence by the principal.
Plain English Explanation
Actual express authority is easy to spot, because it is express and explicit. In contrast, actual implied authority requires an agent to infer they have authority due to some sort of non-explicit conduct or circumstance. There are usually three ways that this happens:
(1) Sometimes an employee recognizes they have an implied authority to form agreements with others because they are necessary in order to complete a task, or there is some urgent situation where they need to make a decision in order to avoid some severe consequence. An example of the former would be if an employee is tasked with "taking care of a leaky faucet," this would implicitly authorize them to do things like (a) hire a plumber, (b) purchase parts, or even (c) have a specialist take a look at water damage caused.
(2) Sometimes an employee has implicit authority to do things that are customarily part of their job. For example, someone with the title of "Office Manager" likely has implicit authority to buy new office supplies, however, they don't have implicit authority to do something like hire a new employee or fire someone.
(3) Finally, there is something called "prior acquiescence by the principal," which is a fancy way of saying, "the boss let it happen before, so they can't complain if it happens again." Hop over to the hypo section for an example.
(1) Sometimes an employee recognizes they have an implied authority to form agreements with others because they are necessary in order to complete a task, or there is some urgent situation where they need to make a decision in order to avoid some severe consequence. An example of the former would be if an employee is tasked with "taking care of a leaky faucet," this would implicitly authorize them to do things like (a) hire a plumber, (b) purchase parts, or even (c) have a specialist take a look at water damage caused.
(2) Sometimes an employee has implicit authority to do things that are customarily part of their job. For example, someone with the title of "Office Manager" likely has implicit authority to buy new office supplies, however, they don't have implicit authority to do something like hire a new employee or fire someone.
(3) Finally, there is something called "prior acquiescence by the principal," which is a fancy way of saying, "the boss let it happen before, so they can't complain if it happens again." Hop over to the hypo section for an example.
Hypothetical
Hypo 1: Sam owns an office where Bob is the janitor. One day while Bob is mopping the floor, Amy knocks on the door. Bob answers. Amy is selling magazine subscriptions. Bob decides that the office could use a magazine subscription, so he sign an agreement with Amy on behalf of Sam's company. When the first magazine comes, Sam is confused, but he likes the magazine. He tells Bob, "Great pick!" A month later, Amy returns and Bob signs up for another magazine. Sam, once again, is happy with Bob's selection for the office. A month later, Amy returns and Bob signs up for another magazine. When it arrives, Sam flips out and yells at Bob, "You had no right to do that. Your job is to mop the floors!" Result: Sam is wrong. Though Bob's job is to mop the floors, Sam's previous acceptance and acquiescence of Bob's actions has led Bob to reasonably believe he has the authority to choose magazines for the office.
Related Concepts
How can actual express authority be revoked?
How can a principal ratify an agreement that their agent made without authority to do so?
When does an agent have actual express authority to enter into an agreement?
When does an agent have apparent authority to enter into an agreement?
When is an agent liable to a third party for an agreement they entered into on behalf of their principal?
When is a principal liable for contracts created by their agent?
