What is meant by “Implied Authority” in agency relationships?

Implied authority refers to the powers that an agent is assumed to have based on their position or the actions they take in relation to their principal. This concept is essential in agency relationships, as it allows the agent to perform acts that are necessary to fulfill their duties, even if these actions are not explicitly outlined in a contract or agreement.

In practice, implied authority arises from the reasonable assumptions made by third parties regarding the agent's ability to act on behalf of the principal. For example, if a manager at a company regularly orders supplies without needing specific approval each time, third parties would recognize that the manager has the implied authority to make such purchases on behalf of the company.

This authority is important because it enables agents to operate effectively in their roles without constantly seeking explicit approval for each action, ensuring smooth business operations. It is based on the functionality and nature of the agency relationship rather than formalized terms or verbal agreements.