Free tool · Business Law

Can an Agent Bind the Principal?

A principal is bound by an agent’s act if the agent had actual authority (express, or implied from what was reasonably necessary or customary), or apparent authority (created by the principal’s own words or conduct towards the third party, who reasonably believed that the agent had authority), or if the principal later ratified the act with knowledge of the facts. Whether the agent is also liable depends on whether the principal was disclosed. An employer is also liable for torts that an employee commits within the scope of employment. Tick the facts to see who is bound.

Tool · Agency Authority Checker

Was the principal’s existence known to the third party?

The principal expressly authorised the actThe act was reasonably necessary or customary to carry out the taskThe principal said or did something that led the third party to think the agent had authorityThe third party’s belief was reasonableThe principal later accepted the benefit or affirmed the act, knowing the factsThe agent signed in their own name, without showing the agencyThe claim is for a tort committed by the agent

The principal is bound (apparent authority).

Apparent authority: the principal’s own words or conduct (not the agent’s) led the third party reasonably to believe that the agent had authority, so the principal is estopped from denying it (for example by leaving the agent in a position that normally carries it).
Disclosed principal: the agent is generally not a party to the contract, so only the principal is liable.

Decides whether a principal is bound by what an agent did, on actual authority (express or implied), apparent authority (created by the principal’s conduct towards the third party), or ratification, who is liable depending on whether the principal was disclosed, and whether an employer is vicariously liable for an employee’s tort. Simplified common-law rules (the Restatement (Third) of Agency); states differ. A teaching aid, not a prediction and not legal advice. Runs in your browser; nothing is stored or sent.

How to use it

Say whether the principal authorised the act expressly, or the act was reasonably necessary or customary.
Say whether the principal led the third party to believe that the agent had authority, and whether that belief was reasonable.
Say whether the principal later affirmed the act, and whether the principal was disclosed.
For a tort, say whether it was within the scope of employment, and read the result.

Common questions

What is apparent authority?

Authority that a third party reasonably believes the agent has because of the principal’s own words or conduct. The agent’s own statements alone cannot create it.

Is an agent personally liable on a contract?

Not if the principal was disclosed and the agent acted within authority. The agent is liable if the principal was undisclosed or partially disclosed, or if the agent lacked authority.

When is an employer liable for an employee’s tort?

When the employee committed it within the scope of employment (respondeat superior): doing the kind of work they were hired to do, within time and place limits and at least partly to serve the employer.

Learn the law behind the tool

This tool is part of our Business Law course, with lectures, concept maps, flashcards, interactive exercises and a capstone case. Business Law: Commercial Transactions II (Agency).

More free law tools

General information, simplified, mainly on American law, not legal advice. States and countries differ, and real cases turn on facts that a tool cannot capture.