Apparent authority is basically a form of authority in which someone is seen as representing a larger agency and is able to act on that agency’s behalf, regardless of whether this authority actually exists or not. This is typically used with reference to large companies and in regard to which people within that company are able to make agreements with others on behalf of that company. An employee for a large retailer at a cash register, for example, may not have actual authority to set prices for customers, but he or she may have an apparent authority to customers to be able to do so.
The issue of apparent authority typically comes up with regard to large organizations and who is allowed to represent those organizations to others. Companies that hire consultants or third parties to conduct various tasks may, therefore, extend apparent authority to those individuals without giving them any actual power. This allows someone working at a company to negotiate terms for business, such as setting up pricing policies for individual customers, even if he or she does not truly have the authority to do so. Such authority can be established in a number of different ways, but typically relies on someone being employed by a company, wearing official clothing or driving official vehicles, and having stationary or business cards for a company with his or her name on them.
Apparent authority is in contrast to actual authority, in which a person is specifically given authority to act in certain ways on behalf of a particular agency. Employees at a company typically have certain types of actual authority to behave in certain ways and conduct some types of business. Apparent authority can also be created when someone leaves a company that he or she previously had actual authority with, but continues to act as though that authority still exists, often called lingering apparent authority.
In order for apparent authority to be legally binding, however, the agency a person attempts to represent must indicate that such authority exists. This does not make the authority actual, but demonstrates that the agency has consented to this authority being established. Should the agency be aware of this type of authority and not support or consent to it, then it has not been established and the agency cannot be held responsible for the actions of the individual. When such authority is established without the agency being aware of it, then the agency may also oppose action against it on the grounds that there was never a basis for that authority being apparent.