Authority of Agents
An agent is a person authorized by the principal to act on the principal’s behalf and under the principal’s control[i]. For an agency relationship to arise, the principal manifests assent to the agent that the agent will act on the principal’s behalf and subject to the principal’s control.
An agency relationship may be implied from the words and conduct of the parties and the circumstances of the case evidencing an intention to create the relationship irrespective of the words or terminology used by the parties to characterize or describe their relationship[ii].
Agency is the fiduciary relation which results from the manifestation of consent by one person, a principal, to another, an agent, that the agent should act on the principal’s behalf and subject to the principal’s control, and consent by the agent so to act[iii].
To establish a principal-agent relationship, one has to show that[iv]:
- a principal consented, expressly or impliedly, to an agent’s acting on the principal’s behalf, and
- the agent was subject to the principal’s control.
The principal must intend that the agent acts for him, and the agent must intend to accept the authority and act on it.
The power of the agent results from the manifestation of the principal’s consent, and extends no further than such manifestation[v]. Additionally, the scope of an agent’s actual authority is determined by the intention of the principal or by the manifestation of that intention to the agent[vi]. The rules of contract interpretation apply in determining the scope of an agent’s powers[vii].
The authority of an agent may be actual or apparent[viii]. Actual authority is created by the principal’s manifestations to the agent, whereas apparent authority is created by the principal’s manifestations to a third party.
Actual authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him/her[ix]. Actual authority is authority that the principal expressly grants to the agent or authority to which the principal consents[x].
Actual authority may be express or implied[xi]. Express authority is created when the principal explicitly tells the agent what to do and implied authority consists of those powers incidental and necessary to carry out the express authority. Absent an express grant of authority, the relationship may result from implied or apparent agency.
The authority given to the agent need not be in writing[xii]. In Weathersby v. Gore, 556 F.2d 1247 (5th Cir. Miss. 1977), the court observed that proof of agency does not depend upon a written agreement. Further, in the absence of express written terms creating the relationship, the existence of an agency is a factual question
Every delegation of authority carries implied authority to do all acts naturally and ordinarily done which are reasonably necessary and proper to carry into effect the main authority conferred[xiii]. The authority of an agent will not be extended beyond that which is given in terms, or is necessary and proper to carry the authority given into full effect[xiv].
An agent is one who has all the powers of his principal, as to the business in which s/he is engaged, and may conduct it conversant with the lawful customs and usage of that particular business[xv]. An agent who has a bare power or authority must execute it himself and cannot delegate his authority[xvi]. However, an agent may employ clerks and sub-agents, whose acts, if done in his name, and recognized by him/her, either specially, or according to his/her usual mode of dealing with them, will be regarded as his/her acts, and, as such, binding on the principal[xvii].
Apparent authority is authority that is conferred when the principal affirmatively, intentionally, or by lack of ordinary care causes third persons to act upon an agent’s apparent authority[xviii]. Apparent authority is created by the conduct of the principal which causes a third person reasonably to believe that another has the authority to act for the principal[xix]. The principal is liable only where there has been an appearance of authority created by himself[xx].
A finding of apparent authority requires evidence that a principal has communicated directly with the third party or has knowingly permitted its agent to exercise authority. One who deals with another as a principal without knowledge of the existence of an agency for another cannot invoke the doctrine of apparent authority against the real principal[xxi].
The doctrine of apparent authority rests upon the principle of estoppel, which forbids one by his/her acts to give an agent an appearance of authority which s/he does not have and to benefit from such misleading conduct to the detriment of one who has acted in reliance upon such appearance[xxii].
To hold the principal liable under apparent agency theory, it must be establish that:
- the principal manifested consent to the exercise of such authority, [xxiii]
- the third person acting in good faith had actually believe that the agent possessed such authority, [xxiv]
- the third person, relying on such appearance of authority, has changed his/her position and injured or suffered loss[xxv].
Thus, there are three essential elements to apparent authority[xxvi]:
- a representation by the principal,
- a reliance on that representation by a third party, and
- a change in position by the third party in reliance on the representation.
The principal is estopped to deny the authority of the agent, because s/he has permitted the appearance of authority in the agent and thereby justified the third party in relying on that appearance of authority as though it were actually conferred upon the agent[xxvii].
However, apparent authority does not arise where the lack of the agent’s authority is known, or should be known to the party dealing with the agent[xxviii]. Furthermore, a principal is never bound where the person dealing with the agent knows, or has reason to know, that the agent is exceeding his authority[xxix].
Authority for an agent to make a specified contract includes, authority to make it in a usual form and with usual terms and to do other acts incidental to its making which are, under like circumstances, usually done[xxx]. However, authority incidental to authority to make a contract does not include authority to perform it or accept performance, to transfer or assign it, to bring suit upon it, to alter its terms, to rescind it, or to waive its conditions or otherwise diminish or discharge the obligations of the third person.
An agent may be authorized to purchase personal property for the principal. When an agent has authority under an agency agreement to purchase goods from a third party on the principal’s behalf, or if the principal retained the benefits of the transaction, then the principal is liable to the third party[xxxi].
A selling agent is authorized to do whatever is necessary and usual to carry out the purpose of the agency. A selling agent may bind his/her principal if s/he does not exceed the power with which s/he is actually or ostensibly vested[xxxii].
Ordinarily, authority to sell will not authorize a sale for anything but money, and does not authorize an exchange[xxxiii]. Where the authority to perform specific acts is given in the power, and general words are also employed, such words are limited to the particular acts authorized[xxxiv].
In Payne v. Jennings, 144 Va. 126 (Va. 1926), the court held that a real estate agent is generally a special agent of limited powers, and those dealing with him/her deal at their risk. Further, his/her only authority is to secure a purchaser who will take the property at a price fixed by the owner. S/he cannot, unless expressly or impliedly authorized, execute a contract of sale on behalf of his/her principal.
In Krug v. Deering Implement Co., 239 Iowa 157 (Iowa 1948), the court held that authority to manage land empowers the agent to lease in the ordinary form for ordinary terms, but not to make an unusual lease. However, authority to lease lands is not to be implied or inferred merely from an authority to sell the subject-matter, to take charge of it, or to receive rents from it.
As to whether an agent has authority to receive payments on behalf of his/her principal, the rule is that, unless otherwise agreed, authority to receive payment is inferred from authority to conduct a transaction if the receipt of payment is incidental to such a transaction, usually accompanies it, or is a reasonably necessary means for accomplishing it[xxxv]. An agent who has been given possession of securities or other evidences of debts payable to the principal is not thereby authorized to receive payment.
The power to borrow money or to execute and deliver promissory notes is not to be implied. It either must be granted by express terms or flow as a necessary and inevitable consequence from the nature of the agency actually created[xxxvi].
An agent who has authority to pay the debts of his/her principal, to disburse money, to settle with creditors or even to bind him/her by a contract or agreement to pay money, is not authorized to sign negotiable paper, by which his/her principal will be bound. The power of binding by promissory negotiable notes can be conferred only by the direct authority of the party to be bound, with the single exception where, by necessary implication, the duties cannot be discharged without the exercise of such a power.
Further, an agent have no power to bind the principal for medical or surgical services and care rendered at the direction of the agent, unless the principal owes to the ill or injured person some duty of care and protection.
A power of attorney authorizing the execution of mortgages, bonds, warrants, bills, notes, etc., and generally to do all things whatsoever relating to the concerns and business of the constituent, confers authority upon the attorney to execute a bond and warrant of attorney to confess judgment for a bona fide debt owing by the constituent[xxxvii].
[i] Koricic v. Beverly Enters. – Neb., 278 Neb. 713 (Neb. 2009)
[iii] Forgeron, Inc. v. Hansen, 149 Cal. App. 2d 352 (Cal. App. 4th Dist. 1957)
[iv] Bar Plan v. Cooper, 290 S.W.3d 788 (Mo. Ct. App. 2009)
[v] Wen Kroy Realty Co. v. Public Nat’l Bank & Trust Co., 260 N.Y. 84 (N.Y. 1933)
[vii] Kiewit/Tulsa-Houston v. United States, 25 Cl. Ct. 110 (Cl. Ct. 1992)
[viii] Bar Plan v. Cooper, 290 S.W.3d 788 (Mo. Ct. App. 2009)
[ix] Hardcore Concrete, LLC v. Fortner Ins. Servs., 220 S.W.3d 350 (Mo. Ct. App. 2007)
[x] Institute for Business Planning, Inc. v. Standard Life & Acci. Ins. Co., 242 F. Supp. 100 (W.D. Okla. 1965)
[xi] Hardcore Concrete, LLC v. Fortner Ins. Servs., 220 S.W.3d 350 (Mo. Ct. App. 2007)
[xii] Richardson v. St. Joseph Iron Co., 5 Blackf. 146 (Ind. 1839)
[xiii] Medley v. Trenton Inv. Co., 205 Wis. 30 (Wis. 1931)
[xiv] Patterson v. Page Aircraft Maintenance, Inc., 51 Ala. App. 122 (Ala. Civ. App. 1973)
[xv] South Carolina Cotton Growers’ Co-op. Ass’n v. Weil, 220 Ala. 568 (Ala. 1929)
[xvi] Rohrbough v. United States Export Co., 50 W. Va. 148 (W. Va. 1901)
[xviii] Koricic v. Beverly Enters. – Neb., 278 Neb. 713 (Neb. 2009)
[xix] Moriarty ex rel. Trustees of the Local 727, I.B.T. Pension Trust v. Smits Funeral Homes, 1997 U.S. Dist. LEXIS 5794 (N.D. Ill. Apr. 21, 1997)
[xx] Smith-Perry Electric Co. v. Transport Clearings of Los Angeles, 243 F.2d 819 (5th Cir. Tex. 1957)
[xxii] Patterson v. Page Aircraft Maintenance, Inc., 51 Ala. App. 122 (Ala. Civ. App. 1973)
[xxiii] Moriarty ex rel. Trustees of the Local 727, I.B.T. Pension Trust v. Smits Funeral Homes, 1997 U.S. Dist. LEXIS 5794 (N.D. Ill. Apr. 21, 1997)
[xxiv] Wells Fargo Business Credit v. Ben Kozloff, Inc., 695 F.2d 940 (5th Cir. Tex. 1983)
[xxv] Greene v. Hellman, 51 N.Y.2d 197 (N.Y. 1980)
[xxvi] Mobil Oil Corp. v. Bransford, 648 So. 2d 119 (Fla. 1995)
[xxvii] Orlando Exec. Park v. P.D.R., 402 So. 2d 442 (Fla. Dist. Ct. App. 5th Dist. 1981)
[xxviii] Texas Co. v. Peacock, 77 Idaho 408 (Idaho 1956)
[xxix] Gaines v. Murphy, 239 S.W.2d 453 (Ky. 1951)
[xxx] Craswell v. Biggs, 160 Ore. 547 (Or. 1938)
[xxxi] N. K. Parrish, Inc. v. Southwest Beef Industries Corp., 638 F.2d 1366 (5th Cir. Tex. 1981)
[xxxii] Myers v. Stephens, 233 Cal. App. 2d 104 (Cal. App. 1st Dist. 1965)
[xxxiii] Maixner v. Travelers Ins. Co., 133 Neb. 574 (Neb. 1937)
[xxxiv] Billings v. Morrow, 7 Cal. 171 (Cal. 1857)
[xxxv] Pampegian v. Richmond, 319 Mass. 216 (Mass. 1946)
[xxxvi] Williams v. Dugan, 217 Mass. 526 (Mass. 1914)
[xxxvii] North River Bank v. Rogers, 22 Wend. 649 (N.Y. Sup. Ct. 1840)