Ostensible authority, also known as apparent authority, is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted. This power arises only if a third party reasonably infers, from the principal's conduct, that the principal granted such power to the agent. The idea of ostensible authority protects third parties who would otherwise incur losses if the agent's signature did not bind the principal after reasonable observers thought that it would. Typically, if an agent has ostensible authority, the agent's principal will be held liable for the actions of the agent which are within the scope of the ostensible authority.
The doctrine of ostensible authority comes up often in agency law, more frequently under the name of apparent authority. It is contrasted with actual authority, which describes an agent’s power to act on behalf of a principal due to such power being expressly or impliedly conferred.
The concept of ostensible or apparent authority arose from the common law, with courts seeking to protect third parties that relied upon a principal’s conduct toward their agent, but it has since been codified into state statutes. For example, California’s Civil Code §2300 defines ostensible agency as “when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him.”
[Last updated in July of 2023 by the Wex Definitions Team]