What does "actual authority" mean?

"Actual authority" refers to the powers that a principal grants to an agent, which can be expressed directly or implied through actions and circumstances. This means that it involves a relationship where the principal has explicitly stated what the agent can do or where the agent's role is defined through the context of their duties.

For instance, if a principal hires an agent and specifies that the agent can negotiate contracts on their behalf, this is an example of express authority. On the other hand, if a principal routinely allows an agent to perform actions that do not require explicit permission but are understood as part of the agent's role, this implies authority—the agent's ability to act is derived from the principal's established practices.

This concept is crucial because it establishes a legal foundation for the agent's actions, ensuring they are aligned with the principal's interests and authorized by the principal. In any legal or business setting, understanding the nuances of actual authority helps all parties recognize the extent to which an agent can operate.

Other options like authority given by third parties or power based solely on written contracts do not capture the essence of actual authority, as they do not encompass the direct or implied nature of authority that exists between a principal and an agent. Similarly, authority recognized in public