In California, actual authority refers to the power granted to an agent by a principal, either expressly or implicitly, to act on the principal’s behalf in specific matters. Express authority occurs when the principal directly communicates the scope of the agent’s power, either verbally or in writing. Implied authority arises from the agent’s role or duties, where it is reasonably inferred that the agent has the power to take actions necessary to fulfill the responsibilities assigned to them. If an agent acts within the bounds of their actual authority, the principal is legally bound by the agent’s actions, and third parties dealing with the agent can enforce contracts as if they were directly made with the principal.
Ostensible authority, also known as apparent authority, exists when a principal’s actions or conduct lead a third party to reasonably believe that an agent has the authority to act on the principal’s behalf, even if no actual authority has been granted. This can occur when a principal allows an agent to perform tasks or take actions that suggest authority, thereby creating the appearance of power to a third party. In California, if a third party reasonably relies on this appearance of authority and enters into a contract with the agent, the principal may still be bound by the contract, even if the agent was not actually authorized to act in that manner. However, the principal may challenge the existence of ostensible authority if the third party knew or should have known that the agent lacked the necessary authority.
