What does “implied authority” mean?
Someone with implied authority can do things reasonably necessary for a group to reach its goals. Under contract law, people with implied power can sign a legally binding document on behalf of another person or business.
How Implied Authority Does Its Job
An agent can do business for a client even if it is not stated or written in a contract. They call this implied authority.
Agents use implied authority in addition to open authority because it is not always possible to spell out an agent’s full authority in writing.
Take real estate as an example. When an agent has express power, the principal has permitted them to act on their behalf.
A Case of Implied Authority
A server at a restaurant has made a deal with you on behalf of the place they work for when they say they can give you a free drink with the purchase of an entree.
The server, as the only company employee responsible for doing business with you, demonstrates their authority. The involvement of other employees in the deal doesn’t matter; they only need to be involved to finish the business deal.
If the restaurant manager came to your table. Then he told you that the waiter made a mistake. And sought to rescind the “free beverage with paid entree” offer. They would violate a contract that you, the customer, and their employee signed.
Even though they can punish the employee, the law forces them to follow through on the terms of the agreement.
The same rule applies to cases that are more complicated or extreme.
Unique Things to Think About
On the other hand, “expressed authority” means that the principal tells the agent what they can and cannot do, either orally or in writing.
“Apparent authority,” also known as “ostensible authority,” refers to the situation. A third party could reasonably believe that the agent had authority, even if it was not explicitly stated or implied.
Conclusion
- In business deals, such as real estate, people often use three types of power: express, implied, and apparent.
- “Apparent authority” is the term used to describe when someone acts in a way that suggests they have permission to do what’s best for the boss.
- When a real estate agent signs a binder with a client, it pretty much means that the agent can act on behalf of the seller.
- Authorization to act on behalf of a client is given by an agent while working for their company. For instance, a life insurance agent may have apparent power from their company.
An insurance business employee with implied authority can ask consumers to apply for life insurance.
When the insurance company provides the agent that power, it implies the agent can phone prospects to set up sales meetings.
Someone bearing a company or group’s emblem or trademark on their uniform or nametag is also considered authoritative.
People often use explicit and implied power in the real estate business.
