Apparent authority allows someone to act on behalf of a larger agency, even if they don’t have actual authority. This is common in large companies and can be established through various means. For it to be legally binding, the agency must indicate that such authority exists.
Apparent authority is basically a form of authority where someone is seen as a representative of a larger agency and is able to act on behalf of that agency, whether or not this authority actually exists. This is typically used in reference to large companies and where people within that company are able to enter into agreements with others on behalf of that company. A large retailer employee at a cash register, for example, may not have the actual authority to set prices for customers, but may have the apparent authority over customers to be able to do so.
The question of ostensible authority typically arises with regards to large organizations and who is authorized to represent those organizations to others. Companies that hire consultants or third parties to perform various tasks may, therefore, extend apparent authority to such individuals without giving them any actual power. This allows someone working at a company to negotiate terms for the business, such as setting pricing policies for individual customers, even if they don’t really have the authority to do so. That authority can be established in a number of ways, but is typically based on someone who is employed by a business, wears official dress or drives official vehicles, and has business cards or calling cards for a business with their name on them.
Apparent authority is contrasted with actual authority, where a person is specifically given the authority to act in certain ways on behalf of a particular agency. A company’s employees typically have certain types of effective authority to behave in certain ways and conduct certain types of activities. Apparent authority can also be created when someone leaves a company with which they previously had actual authority, but continues to act as if that authority still exists, often called lingering apparent authority.
For apparent authority to be legally binding, however, the agency a person attempts to represent must indicate that such authority exists. This does not make the authority effective, but it does demonstrate that the agency consented to the establishment of that authority. If the agency is aware of this type of authority and does not support or consent to it, then it has not been established and the agency cannot be held responsible for the individual’s actions. When such an authority is established without the agency’s knowledge, the agency may also object to an action against it on the grounds that there was never a basis for the existence of such an authority.
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