Actual Authority versus Apparent Authority: Critical Evaluation of Key Differences

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Legal Aspects of Business

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Table of Contents
Introduction............................................................................................................................. 2
Law of Agency.......................................................................................................................... 3
Agent.................................................................................................................................... 3
Principal................................................................................................................................3
Third party............................................................................................................................3
Creation of agency................................................................................................................... 4
Actual authority........................................................................................................................4
Express Actual Authority......................................................................................................4
Implied Actual Authority...................................................................................................... 5
Apparent authority...................................................................................................................5
Advantages and Disadvantages............................................................................................6
Actual Authority: Advantages and Disadvantages....................................................................7
Actual Authority versus Apparent Authority............................................................................8
Conclusion.............................................................................................................................. 10
References..............................................................................................................................11

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Introduction
An agent is a person who is employed by another to do any act or to represent another in
dealing with third parties. The person whose behalf the agent is authorised to act is called
the principal (Munday, 2010). The relationship between agent and principal is referred to an
agency relationship. The authority given to the agent is categorised into actual and apparent
authority under the law of agency. The objective of this report is to critically evaluate the
key difference between actual and apparent authority and in order to understand the
differences, relevant case laws will be analysed. This report will evaluate the law of agency
and parties involved, and the role of authority will be discussed as well. This report will
analyse actual and apparent authority and evaluate their advantages and disadvantages.
This report will analyse what convinced me more between actual and apparent authority
based on evaluation of their advantages and disadvantages.

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Law of Agency
The agency law provides provisions for relationships between an agent, and the principal
and these relationships are formed between two persons; one is called the agent who has
the authority to act on behalf of another called the principal to create legal relationships
with third parties. The concept of agency defines the relationship which is formed between
the agent and the principal in which the right to form legal relationships on behalf of the
principal is given to the agent (Bennett, 2014). In order to create the agency relationship,
the consent and the principal with capacity, the ability to do something is required. It is not
mandatory that the relationship between the agent and principal is in writing. The law of
agency is referred to the judicial relationship which is formed due to the consent of one
person to provide authority to another to act on his/her behalf. Furthermore, the law of
contract defines and recognises the concept of agency. The relationship between the agent
and the principal is referred to a legal contract which is formed between the parties which
allow the agent to form contractual relationships with third parties.
Agent
The agent is a critical character in the law of agency who has express or implied authority to
take action for another party called the principal. The agent has the right to bring the
principal into a contractual relationship with third parties.
Principal
The principal is referred to a party who designates another person (the agent) to act on
his/her behalf. The principal has the primary responsibility in liability, as opposed to an
endorser or guarantor.
Third party
The third party is referred to any buyer or seller who has formed a contractual relationship
with the agent; in this relationship, the principal is liable for the legal obligation rather than
the agent.