Creation and actual authority

Black-letter propositions

1. 01

   Agency can arise without contract, compensation, or formal label when assent, benefit, and control exist.

2. 02

   Express actual authority comes from explicit manifestations; implied authority includes acts reasonably necessary or customary to accomplish authorized objectives.

3. 03

   The agent's reasonable belief is judged from the principal's communications and circumstances.

4. 04

   Actual authority ends through agreement, accomplishment, lapse, revocation, renunciation, changed circumstances, or law, subject to powers given as security.

5. 05

   A principal can be bound even if undisclosed when actual authority exists.

Use this attack sequence under time

Common wrong turns

• The parties' label independent contractor does not prevent agency for some purposes.
• An agent's own claim of authority does not create actual authority.
• Termination of actual authority does not automatically terminate apparent authority.

Worked example

A restaurant owner tells a manager to 'run daily operations.' The manager buys customary kitchen supplies.

Practice this topic

Agency and actual authority

Cornell describes agency law as the common-law doctrine governing relationships between agents and principals. A principal-agent relationship is created when the agent is given authority to act on the principal's behalf, and an agreement made by the agent binds the principal if it was within the authority actually granted or reasonably perceived by a third party. The two forms of actual authority are express and implied.

Express authority covers any action the principal requests and any action inherently necessary to carry it out. Implied authority covers any action the principal's conduct indicates the agent should do, and a principal's failure to object to prior actions may create implied authority to repeat them. An agent has no implied authority to do anything the principal expressly prohibited.

What NCBE's outline lists

NCBE's MEE outline lists agency relationships under three headings: creation, types and termination. It lists the power of the agent to bind the principal under authority, apparent authority and inherent agency power, and it lists the agent's fiduciary duties as care, loyalty and obedience.

Cornell defines actual authority as the agent's power to act because it was expressly or impliedly conferred, with implied actual authority based on the agent's reasonable understanding of the principal's instructions.

Express and implied actual authority, defined

Cornell's actual authority entry says express actual authority is when a principal directly tells the agent that the agent has the authority to take certain action. Implied actual authority is authority based on the agent's reasonable understanding of the principal's instructions. That entry points readers to separate entries on express authority, implied authority and apparent authority.

Frequently asked questions