Define Implied Authority: Everything You Need to Know
When attempting to define implied authority, it's important to understand the circumstances surrounding the case. 3 min read
When attempting to define implied authority, it's important to understand the circumstances surrounding the case. At its core, this term refers to the authority of an agent who is acting on behalf of another entity or person. Someone who has implied authority will do everything necessary to perform his or her duties, within reason.
Contract law permits someone with implied authority to create legally binding contracts on behalf of a company or another person. It's not likely that every detail of implied authority will be spelled out in a written contract.
If you've ever spoken to an insurance agent over the phone, you've dealt with somebody who has implied authority. In this instance, the insurance company has granted implied authority to the agent so they may sell insurance on their behalf. Now, the agent has the right to contact prospective clients and arrange sales appointments.
While implied authority does not spell out every last detail in a written contract, express authority does. Express authority refers to the specific powers given to an agent in a written or oral contract. Implied authority is assumed, as in the case of the insurance agent hired by an insurance company. Express authority, however, defines various components of an agent's authority in a written contract.
When an agent acts with express authority, the scope of their liability is thoroughly outlined. This may make the agent and the company liable for the results of certain actions. However, since implied authority does not contain thoroughly written procedures, liability is less clear.
Another example of implied authority is an employee who bears a name tag or a business card with a company logo. This person has implied authority. Potential clients or customers are going to assume that employee has the authority to act on behalf of the company, and they do. The same is true of an employee who is sent on behalf of a company to conduct repairs on a product. Even if that employee isn't wearing a uniform or name tag, they still possess implied authority.
Removing Implied Authority
A company may remove implied authority from an agent at any time. This can be done in several different ways.
- The company may amend the agreement or contract, removing implied authority.
- The company may terminate the employee.
- The company may discharge the employee of their obligations.
Business Partners' Implied Authority
Business partners have the ability to act with implied authority on behalf of the company. These acts are considered binding, as long as they fall within the purview of normal, everyday business. Examples of actions taken under implied authority include:
- Buying or selling products on behalf of a company
- Accepting payments on behalf of a company
- Accepting or issuing bills on behalf of a company
- Starting a new lease on behalf of a company
Examples of what implied authority does not grant include:
- Submitting a dispute to arbitration on behalf of a company
- Relinquishing claims made by a company
- Proceeding in a legal suit
- Withdrawing from a legal suit
- Admitting liability in a legal suit on behalf of a company
- Purchasing property on behalf of a company
- Entering into a new partnership on behalf of a company
Another delineation from implied authority is apparent authority. This occurs when someone logically concludes that a person has the authority to act on behalf of a company. However, not every act performed under apparent authority is legally binding.
Apparent authority is sometimes referred to as ostensible authority. This occurs when a principal employee's actions result in a third party believing the employee had authority where it was not implied or expressed.
Let's say a customer calls a company to request a quote for a product. Let's say Georgina answers the phone. Georgina is only a cashier, not a customer service representative. But, the customer does not know this. Even though Georgina is neither trained nor authorized to discuss package pricing with customers, she chooses to assist the customer. When the customer arrives at the store to make the purchase, the company may be liable to uphold the oral agreement made between Georgina and the customer.
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