Apparent Authority

Overview

Apparent authority is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted.  This power arises only if a third party reasonably infers, from the principal's conduct, that the principal granted such power to the agent.  The idea of apparent authority protects third parties who would otherwise incur losses if the agent's signature did not bind the principal after reasonable observers thought that it would. Typically, if an agent has apparent authority, the agent's principal will be held liable for the actions of the agent which are within the scope of the apparent authority.

"The doctrine protects innocent third persons who have reasonably relied to their detriment upon the representations of those whom the principal holds out as possessing authority to act for him."

Different states will interpret the doctrine of apparent authority in various ways.

Connecticut

Connecticut uses the definition set forth in Restatement (Third) of Agency § 2.03 (2006): "Apparent authority is the power held by an agent or other actor to affect a principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations to recognize apparent authority and apparent agency as separate doctrines." 

New Jersey

New Jersey's interpretation of apparent authority inherently categorizes the doctrine as misleading: "'apparent authority' requires action by the principal that has 'misled a third party into believing that a relationship of authority does in fact exist.'" This categorization would suggest that New Jersey courts may be hesitant to continue to apply the doctrine. 

Georgia

In Georgia, the doctrine of apparent authority "is based upon the principle that where one of two innocent parties must suffer from the wrongful act of another, the loss should fall upon the one who, by his conduct, created the circumstances which enabled the third party to perpetrate the wrong and cause the loss." Thus Georgia draws less of a distinction between the principal and the agent as other states do.

Agency Law

Intro

The doctrine of apparent authority comes up often in agency law. Under agency law, apparent authority is defined as an agent having the authority to act on behalf of a principal when if manifestations of the principal to a third party would lead a reasonable third party to believe that the principal authorized the agent to act. If an agent has apparent authority and acts within the scope of the authority, then the principal is bound by the agent's actions. 

Quite often, the same situation that grants apparent authority will also necessarily grant actual authority.

In American Soc'y of Mech. Eng'rs v. Hydrolevel, 456 U.S. 566 (1982), the Supreme Court upheld apparent authority as a legitimate doctrine under agency law, holding, "Under general rules of agency law, principals are liable when their agents act with apparent authority . . . An agent who appears to have authority to make statements for his principal gives to his statements the weight of the principal's reputation -- in this case, the weight of petitioner's acknowledged expertise in boiler safety.

Power of Position

The "power of position" refers to apparent authority that is created by appointing someone to a position which carries recognized duties (i.e. manager or treasurer). In this situation, there will be apparent authority to do the things which are regularly and typically entrusted and expected of someone with the position title. In New York, this principle was explicitly upheld in Pasquarella v. 1525 William St., LLC, 120 A.D.3d 982 (N.Y. App. Div. 2014), when the New York Appellate Division held that the manager of company has the apparent authority to bind the company to contracts, regardless of whether he has actual authority.  

Even if the the principal has expressly placed limitations on the agent's abilities, but these limitations are not known, then the agent will still have the apparent authority to do those things. 

Criminal Law

Warrantless Searches

The issue of apparent authority has come up in cases related to warrantless searches of property. In Illinois v. Rodriguez, 497 U.S. 177 (1990), the Supreme Court held, "A warrantless entry is valid when based upon the consent of a third party whom the police, at the time of the entry, reasonably believe to possess common authority over the premises, but who in fact does not." 

Law Governing Lawyers 

The "law governing lawyers" refers to ethics rules adopted by legal governing bodies such as the American Bar Association and state bar associations. The Restatements of the Law  discuss apparent authority, specifically in the Restatement of the Law (3d) of the Law Governing Lawyers. According to the Restatement Third § 27, A Lawyer's Apparent Authority, a lawyer has apparent authority  "if the tribunal or third person reasonably assumes that the lawyer is authorized to do the act on the basis of the client's (and not the lawyer's) manifestations of such authorization."

Further Reading

For more on apparent authority, see this Louisiana Law Review article, this Marquette Law Review article, and this Florida State University Law Review article