Also known as: ostensible agencies · ostensible agent · ostensible agents · apparent agency · apparent authority
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine under which a principal becomes bound by the acts of another when the principal's own manifestations to a third party reasonably cause that third party to believe the other person is authorized to act for the principal.
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Coastal Capital supplied Marilyn with business cards listing her as Associate Advisor and permitted her to meet clients at firm offices without disclaimers. Mark received a discretionary trading form on firm letterhead signed by Marilyn and immediately transferred funds and liquidated positions. When Coastal Capital later denied the trades, Mark's reliance on the appearance created by the firm's conduct bound the firm to the authorization.
A general partner in Overland Transport accepted payment from a shipper for priority routing and then diverted the funds. The shipper had dealt only with the partner during ordinary business dealings and had no notice of internal limits. The limited partnership became liable for the resulting loss under rules governing acts within apparent authority.
A partner at Oakridge Manufacturing collected customer deposits for equipment orders and then misapplied the funds to personal use. Customers had transacted exclusively with the partner in the ordinary course of the firm's business. The partnership was held liable for the customers' losses.
Odessa Okada's lawyer of record represented to opposing counsel that a personal-injury claim had been settled for a stated sum. Opposing counsel had no notice of any restriction on the lawyer's authority. The court enforced the settlement against Okada despite her later claim that the lawyer lacked actual authority.
Optima Health advertised its emergency department as staffed by its own physicians and presented no disclosure that the treating doctor was an independent contractor. A patient reasonably believed the physician was an employee and sought care on that basis. The hospital was liable for the physician's negligence under ostensible-agency principles.
A general partner at Olympia Steel accepted advance payments from a buyer for custom fabrication and then diverted the money. The buyer had no notice of any restriction and dealt solely with the partner during ordinary partnership business. The limited partnership was required to make good the loss.
Some authorities require a showing that the third party changed position in reliance on the appearance of authority, while others focus only on whether the belief was reasonable. The Restatement (Second) of Agency formulation centers on the principal's manifestations creating the belief, and courts applying the doctrine in partnership and corporate settings often examine whether the third party's actions were induced by those manifestations.
A limited partner is not an agent of the limited partnership solely by reason of limited-partner status. Other law, including ostensible-agency principles, may still impose liability on the partnership when the limited partner's conduct, combined with the general partner's inaction, creates a reasonable belief in third parties that the limited partner speaks for the entity.
…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,…
…be held responsible for the acts of its agents throughout the country that are undertaken within the scope of their actual or
…of their employment unless . . . the servant purported to act or speak on behalf of the principal and there was reliance on apparent authority
…purposes likely intended to be met by the ‘aided in accomplishing’ basis are satisfied by a more fully elaborated treatment of apparent authority
…right of action on behalf of individuals harmed by an act of torture or extrajudicial killing committed “under actual or apparent authority
Ostensible agency arises from the principal's manifestations to third parties that create a reasonable belief in authority. Inherent agency power, by contrast, derives solely from the agency relation itself and exists to protect third parties even without manifestations or estoppel.
Hospitals may be held vicariously liable when they hold out independent physicians as employees by presenting their services as part of routine hospital care and patients reasonably rely on that appearance. Courts examine whether the patient looked to the institution rather than the individual physician and whether the hospital created the appearance of an employment relationship.