First Principles of Business Law

3. Obtaining authority to act as an agent

3.1. The power to represent a principal

The courts are often asked to decide whether a principal is bound by particular acts of an agent. This question is decided by inquiring whether, in the circumstances, the agent had a legally recognised power to represent the principal and bind the principal to third parties.

How does an agent acquire such a power? The answer is that is can arise in different ways, depending on the circumstances.

Sometimes the power is given directly by the principal to the agent, by an express grant of authority to act as a representative. In other situations, a grant of the power to represent may arise indirectly (impliedly). And in some circumstances the power of an agent to represent a principal can arise even if the principal has made no express or implied grant of authority.

It is important to be able to identify the different situations in which an agency power might exist, and to know what factors are relevant to determining this question.