Apparent Authority in Positive Law and Court Practice

Abstract

According to the general rule explaining apparent authority, if the behaviour of a principal gives reasonable grounds for the third party to think that the principal has appointed the other person to be his agent, contracts concluded by the third party in the principal’s name shall be binding on the principal, notwithstanding the fact that the agent was not authorised by the principal to conclude particular contracts. In the absence of evidence of apparent authority the agent shall have to redress the damage incurred on a third party in cases where the third party was not aware, and was under no obligation to be aware, of circumstances that the person acted in other person’s name without their express authorisation or in excess of their authority. The principal shall be liable for actions of the apparent agent if the following three requirements are proven: words or conduct of the principal caused the impression of authority; third party could reasonably presume the existence of sufficient authority; third party acted in good faith. The third party’s legitimate expectations must be aligned with the principal’s will in order to apply the doctrine of apparent authority efficiently.