Restatement (Third) of Agency · Section § 2-01
An overview of authority types within agency relationships as defined by the Restatement.
Source: Restatement Restatement (Third) of Agency § § 2-01
An agent has actual authority when the agent reasonably believes that the principal has granted the agent the authority to act on the principal's behalf.
This section defines 'actual authority' as the power an agent has to act on a principal's behalf if the agent believes the principal has granted them that power. It ensures that agents can effectively represent the principal's interests under the right circumstances.
Comment a emphasizes that actual authority can be express or implied.
Comment b addresses the importance of the agent's reasonable belief in their authority.
Illustration 1
An agent is explicitly told by the principal to negotiate a contract, which grants them express actual authority.
Illustration 2
An agent has been consistently allowed to make purchasing decisions in the past, leading them to reasonably believe they have the authority, constituting implied actual authority.
The court found that the agent had actual authority based on the principal's prior conduct and communications.
Understanding actual authority is crucial for both agents and principals in managing expectations and responsibilities in business transactions. It also protects third parties in dealings with agents who represent principals.