Abstract Various issues in the common law arise when agents make contracts on behalf of principals. Should a principal be bound when his agent makes a contract on his behalf that he would immediately wish to disavow? The tradeoffs resemble those in tort, so the least-cost avoider principle is useful for deciding which agreements are binding and can unify a number of different doctrines in agency law. In particular, an efficiency explanation can be found for the undisclosed-principal rule, under which the agent's agreement binds the principal even when the third party with whom the contract is made is unaware that the agent is acting as an agent. Show Journal Information The rise of the field of law and economics has been extremely rapid over the last 25 years. Among important developments of the 1990s has been the founding of the American Law and Economics Association. The creation and rapid expansion of the ALEA and the creation of parallel associations in Europe, Latin America, and Canada attest to the growing acceptance of the economic perspective on law by judges, practitioners, and policy-makers. The Review is a refereed journal, published twice a year. It maintains the highest scholarly standards, and at the same time endeavours to publish international work that is accessible to the full range of membership in the ALEA, which includes practising lawyers, consulting economics and academic lawyers, and academic economists from around the world. The Review differs from other journals in the field in that it features book reviews and review essays. It also differs from other scholarly economic journals in particular, in that the Editors endeavour to make the material more easily accessible to non-academics. Publisher Information Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide. OUP is the world's largest university press with the widest global presence. It currently publishes more than 6,000 new publications a year, has offices in around fifty countries, and employs more than 5,500 people worldwide. It has become familiar to millions through a diverse publishing program that includes scholarly works in all academic disciplines, bibles, music, school and college textbooks, business books, dictionaries and reference books, and academic journals. Rights & Usage This item is part of a JSTOR Collection. Apparent authority is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted. This power arises only if a third party reasonably infers, from the principal's conduct, that the principal granted such power to the agent. The idea of apparent authority protects third parties who would otherwise incur losses if the agent's signature did not bind the principal after reasonable observers thought that it would. Typically, if an agent has apparent authority, the agent's principal will be held liable for the actions of the agent which are within the scope of the apparent authority. Agency LawThe doctrine of apparent authority comes up often in agency law. In American Soc'y of Mech. Eng'rs v. Hydrolevel, 456 U.S. 566 (1982), the Supreme Court upheld apparent authority as a legitimate doctrine under agency law, holding, "Under general rules of agency law, principals are liable when their agents act with apparent authority . . . An agent who appears to have authority to make statements for his principal gives to his statements the weight of the principal's reputation” -- in this case, the weight of petitioner's acknowledged expertise in boiler safety. Power of PositionThe "power of position" refers to apparent authority that is created by appointing someone to a position which carries recognized duties (i.e. manager or treasurer). In this situation, there will be apparent authority to do the things which are regularly and typically entrusted and expected of someone with the position title. In New York, this principle was explicitly upheld in Pasquarella v. 1525 William St., LLC, 120 A.D.3d 982 (N.Y. App. Div. 2014), when the New York Appellate Division held that the manager of a company has the apparent authority to bind the company to contracts, regardless of whether he has actual authority. Even if the principal has expressly placed limitations on the agent's abilities, but these limitations are not known, then the agent will still have the apparent authority to do those things. [Last updated in June of 2022 by the Wex Definitions Team] What is a condition for apparent authority?Apparent authority is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted. This power arises only if a third party reasonably infers, from the principal's conduct, that the principal granted such power to the agent.
Why Should a principal be bound by the actions of an agent in the absence of actual authority?This means a principal is bound by the agent's actions, even if the agent had no actual authority, whether express or implied. It raises an estoppel because the third party is given an assurance, which he relies on and would be inequitable for the principal to deny the authority given.
Which of the following are ways in which an agency can be terminated?There are many ways to terminate an agency. These ways can be broken down into two types: (1) termination by the acts of the parties and (2) termination by the operation of law.
What is the key factor in apparent authority?Apparent authority arises when the principal "holds out" the agent as having certain authority, causing third parties to reasonably believe the agent has such authority.
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