What is the type of authority indicated by one's actions called?

The type of authority indicated by one's actions is known as apparent authority. This concept arises when a third party reasonably believes that an individual has the authority to act on behalf of another party, based on the actions, communications, or behaviors of the principal.

When a principal's conduct leads a third party to conclude that an agent has the authority to act, the principal may be bound by the agent's actions, even if the agent does not have actual authority. This principle protects third parties who rely on the representations made by the principal.

For example, if a company consistently allows an employee to negotiate deals and communicate with clients, the employee may be perceived as having the authority to bind the company in contracts. Even if the company had not formally designated that employee as an authorized agent, their previous actions could establish apparent authority.

Understanding apparent authority is crucial in the context of agency relationships and contractual obligations, as it underscores the importance of clear communication and consistent behavior in business dealings.