Contract Glossary

Apparent Authority

Definition

When a third party reasonably believes someone has the authority to act on behalf of a business, even if that person doesn't actually have that authority. The business can be bound by the deal if it created the impression that the person was authorized.

In Practice

Your office manager has been ordering supplies and signing vendor contracts for years. You never gave them formal authority, but vendors reasonably believe they can commit your company. If the manager signs a $15,000 contract with a new vendor, you're probably on the hook, because you created the appearance of authority through your past behavior.