Apparent authority

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Apparent authority is a term used in the law of agency to describe a situation in which a principal leads a third party to believe that an agent has authority to bind the principal, even where the agent lacks the actual authority to bind the principal. In such circumstances, the law will hold the principal liable for the acts of the agent, out of fairness to the third party. There must be some act or some knowing omission on the part of the principal - if the agent alone acts to give the third party this false impression, then the principal is not bound. However, the principal will be bound if the agent so acts in the presence of the principal, and the principal stands silently and says nothing to dissuade the third party from believing that the agent has the authority to bind the principal.

Apparent authority can also occur where a principal terminates the authority of an agent, but does not inform third parties of this termination.

This is called lingering apparent authority. Business owners can avoid being liable by giving public notice of the termination of authority, and by contacting any individual third parties who would have had reason to know of such authority.

In relation to companies, the apparent authority of directors, officers and agents of the company is normally referred to as "ostensible authority".