Actual authority refers to the power that a principal has expressly or implicitly given to an agent to act on their behalf.
This type of authority arises from an agreement or understanding between the principal and agent, indicating that the agent is authorized to perform certain acts or transactions.
Actual authority can be specific, with clear boundaries, or general, allowing the agent a wider scope of action.
In the context of agency law, actual authority underscores the agent's legitimate power to make decisions, enter into contracts, or take actions that legally bind the principal. Express actual authority is granted through direct communication, such as written or spoken instructions.
Implied actual authority, on the other hand, arises from the duties assigned to the agent, suggesting the agent has the power to perform tasks that are reasonably necessary to accomplish those duties.
Commercial Law: Actual authority is crucial in determining the validity of contracts entered into by agents on behalf of businesses or individuals.
Employment Law: Employees may have actual authority to make decisions or take actions within the scope of their employment, affecting the employer's legal rights and obligations.
A common misconception is that actual authority and apparent authority are the same.
While both relate to the powers of an agent, apparent authority arises from the principal's representations to third parties, leading them to reasonably believe that the agent is authorized, regardless of any actual authority granted.
Another misunderstanding is that actual authority must always be written; it can also be conveyed implicitly through actions or circumstances related to the agent's role.
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