Implied authority, also known as “usual authority,” is the authority of an agent acting on behalf of another person or entity. The person acting with implied authority does what is reasonably necessary in order to effectively perform his duties. The acts undertaken surrounding the use of implied authority depend on the circumstances and the case. To explore this concept, consider the following implied authority definition.
Definition of Implied Authority
- Authority that is not specifically expressed or defined in writing, but which an employee or agent assumes to possess in order to conduct business on behalf of an agency.
Implied vs. Actual Authority
Actual authority, also referred to as “express authority,” pertains to specific powers to given to an agent in an oral or written contract. This differs from implied authority in that implied authority is has been assumed because of the circumstance.
For example, when an employee or agent wears a uniform, name tag, or has a business card bearing the trademark or logo of a company, that individual carries implied authority. This is because consumers are likely to assume the individual has authorization to act on behalf of the company. The same would be true of an employee sent by a company or agency to make repairs, even if the employee wore no uniform or name tag. Because implied authority is often incidental, it is impossible to define every single aspect of the agent’s authority in a written contract.
Example of Implied Authority
When John visits a local bar, the server tells him he will receive a free drink if he orders an entrée. By making this offer, the server has made an oral contract with John on behalf of the bar. John assumes that the server has the authority to offer a free drink since he is an employee of the business and acting on behalf of the owner.
Liability in Actual and Implied Authority
When an agent acts on actual authority, the scope of which is outlined in a written document, both the agent and agency may be held liable the results of such actions. When an agent acts on implied authority, however, the scope cannot be specifically determined, and so liability becomes a fuzzy issue. The employer or agency may claim the agent acted outside his authority, leaving the agent holding the bag.
Termination of Implied Authority
At any given time, an agency can take implied authority away from an employee. This can be done in several ways including:
- Amending a contract or agreement taking away authority
- Ending the agent’s employment
- Discharging the agent of any obligations
Implied Authority of a Partner
Each partner in a business has the implied authority to act in the name of the company. Such acts are binding on the other partners, so long as they fall within the ordinary course of the company’s normal business. Such acts of implied authority may include:
- Buying or selling goods on behalf of the company
- Accepting payments on debts owed to the firm
- Accepting, making, or issuing bills on the firm’s behalf
- Taking on a new lease on the firm’s behalf
On the other hand, implied authority does not authorize a partner to:
- Submit a company dispute to arbitration
- Relinquish any claim made by the firm
- Withdraw or proceed in a legal suit
- Admit liability in a legal suit against the firm
- Purchase property on the firm’s behalf
- Enter a new partnership on the firm’s behalf
Apparent authority arises when someone logically concludes an individual has the authority to act on behalf of another person or entity to do business or enter into contracts. Typically, this belief stems from the person’s actions leading to the belief that they have been given authority to act. Not all acts performed under apparent authority are legally binding.
Example of Apparent Authority
Bob works as a cashier at a stationery shop. Though Bob does not order products or price them, he gives a price quote to a customer who calls requesting customized stationery. While Bob does not have the actual authority to give customers price quotes, his position providing customer service gives him the apparent authority to do so. Even though the company did not authorize Bob to give price quotes to customers, the costumer would be entitled to the price Bob quoted, since the customer reasonably assumed that Bob had the authority to make such an offer. The company must uphold the oral agreement made between Bob and the customer.
Related Legal Terms and Issues
- Agent – a person who acts on behalf of another person or entity
- Agency – a business or organization that has been established to provide goods or services
- Infer – come to a conclusion based on reasoning or evidence rather than from specific statements
- Liable – responsible according to the law