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Hi Sir,
Could you please explain the difference between implied and apparent authority?
For example, in this question:
Alvin, Simon and Theodore have been in partnership for many years running a vets practice. The partnership agreement states that all drugs are only to be purchased from Dave. Theodore has been suffering from ill health for a number of years and has now retired. Simon has entered into a contract to buy drugs from Brittany. The drugs have been delivered but now Alvin is refusing to pay for them. Dave is also due payment for drugs purchased by the partnership.
(a) State whether Simon has acted within his authority.
The answer is: He acted within his apparent authority.
My answer would’ve been he acted within his implied authority because a partner of a vets practice should have the implied authority to purchase drugs. He was acting within the expected authority of a partner within that type of business.
Could you please help me out with understanding the difference between the two types of authorities?
Thank you.
This is a tricky area!
Try this as an explanation:
Apparent authority is based on the appearance of authority created by the principal, while implied authority is inferred from the circumstances or the nature of the partnership.
Apparent authority is created by the role played / appointments made by a principal whereas implied authority needs no involvement of a principal. This authority is implied because of the nature of the position that the ‘wrong-doer’ held.
Is that any clearer?
Yes, that makes sense! Regarding my earlier post, do you think the answer in the book is right? Or do you think the answer should’ve been that Simon acted within his implied authority?
Thanks!
I put this question to the AI page: What is the difference between ostensible authority, implied authority and apparent authority.
And this is what came back:
1. Ostensible Authority: Ostensible authority, also known as apparent authority, arises when a principal creates the appearance of authority for an agent, leading third parties to reasonably believe that the agent has the authority to act on behalf of the principal. It is based on the actions, representations, or conduct of the principal. Even if the agent does not actually have the authority, the principal may still be bound by the agent’s actions if a third party reasonably relies on the appearance of authority.
2. Implied Authority: Implied authority is authority that is not expressly granted by the principal but is reasonably necessary to carry out the agent’s duties or is inferred from the nature of the agency relationship. It is based on the agent’s activities, the customs of the trade, or the usual course of dealing. Implied authority can be implied from the conduct of the parties or the circumstances of the case.
3. Apparent Authority: Apparent authority is another term for ostensible authority. It refers to the authority that an agent appears to have based on the representations or conduct of the principal. It is the authority that a third party reasonably believes the agent possesses, even if the agent does not actually have that authority.
In summary, ostensible authority and apparent authority are essentially the same, referring to the authority that appears to exist based on the principal’s actions or representations. Implied authority, on the other hand, is authority that is reasonably necessary or inferred from the circumstances or conduct of the parties.
I believe that that is a fuller version of my previous post (with the addition of ostensible authority)
Is that any better?
Yes, I understand it better now. So the answer in the book is wrong then? Simon has implied authority and NOT apparent authority?
Thanks a lot for your explanation!
I’m going through the posts for revision and to try and get a better understanding.
Do you think it’s apparent authority because Brittney believes he has authority.
Is it implied is what the principal assumes to the agent.
Apparent is what the client believes
Simon is acting, surely, within his apparent authority. The actions of the principal, the partnership, automatically give partners the apparent authority for partners to enter contracts on the firm’s behalf.
IF Simon had been specifically excluded from the purchasing activities by the three person partnership (A, S and T) and yet had gone ahead and purchased drugs from Brittany, that would have (probably) been enforceable by Brittany against the firm because Simon would have had implied authority – the nature of the firm and Simon’s position within the firm
Does that make sense?
That’s good to hear! As I posted in my first response on this thread ‘This is a tricky area!’
‘Apparent’ arises from the principal’s action whereas ‘implied’ arises from the situation.
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