Also known as: apparent authority
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine under which a principal remains bound by an agent's apparent authority after actual authority has terminated if the principal fails to notify third parties who previously dealt with the agent. The doctrine protects third parties who reasonably continue to believe the agent retains power based on the principal's prior manifestations. Notice to known third parties or public notice is required to cut off the lingering effects.
Coastal Capital suspended Marilyn's trading authority internally but left her access to letterhead and templates without notifying clients. Mark, who had previously dealt with Marilyn using firm materials, executed a discretionary authorization she sent and transferred funds in reliance. Coastal Capital remains bound because it failed to provide notice that would terminate the apparent authority created by its earlier manifestations.
After internal revocation of a general partner's authority to enter new contracts, the limited partnership took no steps to notify existing counterparties. A third party who had previously contracted with the partner relied on the continuing appearance and entered a new deal. The limited partnership is liable for the resulting loss because the partner's apparent authority lingered absent notice.
Select any source to read its text and confirm it supports the definition.
A partnership internally limited a partner's authority to sign supply contracts but gave no notice to vendors who had dealt with the partner before. The partner signed a new supply agreement on partnership letterhead with a long-time vendor who reasonably believed authority continued. The partnership is liable because the apparent authority created by prior dealings lingered without notification.
A client revoked settlement authority given to counsel of record but failed to notify opposing counsel. Opposing counsel relied on the lawyer's representation that a settlement had been reached and changed position accordingly. The settlement remains enforceable against the client because the lawyer's apparent authority to settle lingered absent notice of the revocation.
A principal internally revoked an agent's authority to receive payments but did not notify customers who had previously paid through the agent. The agent accepted and misapplied a customer's payment after the revocation. The principal is liable for the loss because the agent's apparent authority to receive funds lingered without notice to the customer.
A limited partnership internally revoked a general partner's authority to collect payments but gave no notice to vendors. The general partner accepted and misapplied a vendor's payment after the revocation. The limited partnership is liable for the loss because the general partner's apparent authority to receive funds lingered absent notice.
A principal must recover indicia of authority and send individual notice to all persons who extended credit to or received credit from the principal through the agent. Reasonable public notice ordinarily suffices for all others. Without such steps, third parties who previously dealt with the agent may continue to rely on the prior manifestations.
Supporting sources
No. Termination of actual authority does not end apparent authority. Third parties without notice of internal restrictions remain entitled to rely on the ongoing appearance created by the principal's earlier conduct.
Supporting sources
Leaving an agent access to firm letterhead, digital templates, business cards, or other indicia of authority after internal revocation, combined with failure to notify clients, perpetuates the appearance that the agent remains authorized.
Supporting sources
Yes. Third parties who lack notice of internal restrictions are entitled to rely on the ongoing appearance created by the principal's prior conduct, especially when the principal continues to make firm resources available to the agent.
Supporting sources
…As to the bank: It was put upon notice of the improper activities of its employees, Gale and Haslem, knowingly created the apparent authority on their part, and was responsible for their conduct. Its liability was joint and several with that of Gale and Haslem. The District Court then ruled that each of the defendants, that is,…