The doctrine of apparent authority as a precondition for sustainable business

Abstract

In the light of modern commercial relationships, the doctrine of apparent authority plays an important role in ensuring the sustainability of business. Where the business undertaking is a large and complex one, it would be difficult and inconvenient for a person or legal entity to communicate every transaction with the agent. Thus, an agent’s effective powers in dealing with third parties may extend to transactions that he was not authorized to undertake by the principal. Such situations are usually characterized as apparent authority. The difficulty with this type of authority lies in the lack of control on the part of the principal which entails certain questions of liability of either the agent or the principal. Even though the third party has to check the agent’s authority, he cannot know about all the details of the agent’s internal authorization. Therefore, there is always a risk that the agent was not authorized to act. This article is deemed to provide a comprehensive analysis of the doctrine of apparent authority from a comparative perspective. A conclusion is made that the doctrine is an efficient mean of apportioning the risk of liability for agent’s unauthorized act between the principal and the third party with individual factors determining who must bear liability it in every specific case.