Apparent authority, estoppel, and ratification

Black-letter propositions

1. 01

   Apparent authority requires a principal manifestation reaching the third party and a reasonable belief that the agent is authorized.

2. 02

   A former agent may retain lingering apparent authority until third parties receive appropriate notice.

3. 03

   Agency by estoppel protects a third party who changes position because the principal carelessly or intentionally caused a belief in authority.

4. 04

   Ratification requires an identifiable principal with capacity, knowledge of material facts, and affirmance of the whole act before circumstances make ratification inequitable.

5. 05

   Ratification relates back subject to intervening-rights and timing limits.

Use this attack sequence under time

Common wrong turns

• An agent cannot create apparent authority by self-description alone.
• An undisclosed principal ordinarily cannot create apparent authority.
• A principal cannot ratify only the favorable portion of one transaction.

Worked example

A company leaves a former purchasing officer listed on its vendor portal after termination, and a longtime vendor reasonably relies.

Practice this topic

Apparent authority

Cornell says apparent authority is the power of an agent to act for a principal even though it was not expressly or impliedly granted, arising only if a third party reasonably infers from the principal's conduct that the principal granted it. It protects third parties who would otherwise incur losses if the agent's signature did not bind the principal after reasonable observers thought it would. If an agent has apparent authority, the principal is typically liable for the agent's actions within its scope.

Unlike actual authority, a principal can be bound by an agent's act with apparent authority even if the principal explicitly said the agent could not do that act. A person with a widely recognized title has apparent authority to do what a reasonable person would believe the title entails.

Estoppel and ratification

Cornell describes estoppel as an equitable doctrine that prevents a person from asserting a claim or right that contradicts what they have said or done before. It can be a bar to relitigation or an affirmative defense. Cornell's ratification entry is only a pointer (See: ratify) and gives no definition, so take the rule from your course materials.

On an exam, name the source of the authority: written or spoken instructions, the principal's conduct toward the third party, or the principal's later approval of an unauthorized act.

Power of position and the Supreme Court

Cornell's entry says the power of position is apparent authority created by appointing someone to a position that carries recognized duties, such as manager or treasurer. It cites a New York appellate case holding that a company's manager had apparent authority to bind it to contracts regardless of actual authority. Limits the principal placed on the agent do not defeat apparent authority if the third party did not know of them.

The same entry says the Supreme Court upheld apparent authority as a legitimate doctrine in American Society of Mechanical Engineers v. Hydrolevel, 456 U.S. 566 (1982). An agent acting with apparent authority is called an ostensible agent.

Frequently asked questions