What principle defines the authority an agent believes they have to perform their job?

The principle that defines the authority an agent believes they have to perform their job is known as "apparent authority." This concept refers to the authority an agent appears to possess to third parties based on the actions or representations of the principal. When a principal creates a certain perception of authority through their conduct, the agent can exercise authority within that perceived scope, even if the principal has not explicitly granted such authority.

For instance, if a principal allows an agent to negotiate and sign contracts on behalf of the company without explicit limitations communicated to third parties, those third parties may reasonably believe the agent has the authority to act in that capacity. This is crucial in maintaining trust and ensuring that third-party interactions with the agent are valid and enforceable.

In contrast, express authority involves clear, outright permission granted by the principal to the agent, which is usually documented or verbally confirmed. Implied authority arises from the agent’s position or the task they are performing, which logically necessitates certain powers to complete their duties. Inherent authority is often linked to the nature of the agency relationship and the customary duties associated with that role.

Understanding these distinctions helps clarify how agents operate and ensures that they act within the bounds of their perceived authority.