§ 1.3.7.2 PRINCIPAL'S CONTRACTUAL LIABILITY FOR AGENT'S APPARENT AUTHORITY.

• Jurisdiction: Arizona

§ 1.3.7.2 Principal's Contractual Liability for Agent's Apparent Authority. A principal may be liable for contractual obligations incurred by the agent acting with the apparent authority of the principal.⁸⁴ Apparent authority is present "when a third party reasonably believes the agent has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations."⁸⁵ Apparent authority can never be derived from acts of the purported agent alone.⁸⁶ "Manifestations" by the principal as to the scope of the agent's authority may take numerous forms, including placement within a position customarily holding authority,⁸⁷ requesting the agent to make statements to third parties, designating an agent to conduct negotiations,⁸⁸ placing an agent in charge of a transaction, or listing an agent as a representative.⁸⁹

To establish apparent authority, the third party bears the burden of proving (1) conduct by the principal that gives the appearance that an agent has certain authority; (2) the third party's knowledge of the principal's conduct; (3) the third party's reliance on the principal's conduct in concluding that an agent has the purported authority; and (4) the reasonableness of the third party's reliance on the agent's apparent authority.⁹⁰ Apparent authority is limited by the character of the principal's business and the duties performed by the agent.⁹¹Apparent authority does not support a claim of defamation, trespass or negligence, because any claimed injury necessarily occurs without reliance upon the principal's conduct.⁹²

A third party need not prove that the principal's manifestation induced a detrimental change in position to establish apparent authority.⁹³ Nonetheless, where a third party is justifiably induced to make a detrimental change in position, a principal may be estopped from denying an agency relationship if the principal "intentionally or carelessly" caused the third party to believe that the agent was acting on his behalf or "having notice of such belief and that it might induce others to change their positions" fails to "take reasonable steps to notify them of the facts."⁹⁴ The reasonableness of the third party's belief and whether the belief is traceable to a manifestation of the principal are questions of fact for the jury.⁹⁵

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Notes:

^[84] Tway v. S. Methodist Hosp. & Sanitorium, 48 Ariz. 490, 62 P.2d 1318 (1937); O.S. Stapley v. Logan, 6 Ariz. App. 269, 431 P.2d 910 (1967); Gibraltar Escrow Co. v....