Real Estate Transactions with Legal Entities – Who Has Authority? img

Real Estate Transactions with Legal Entities – Who Has Authority?

calender icon 12/14/2022    poster icon  Mark Goodman

A business entity could challenge the validity of a conveyance by arguing that the person who signed for the company was not an agent of the company and therefore had no legal authority to act on the company’s behalf. Agency is the legal status in which one person, the agent, has the authority to conduct business for another party, the principal. Many business entities must rely on their agents (employees) to transact business and make conveyances on behalf of their business entities. Principals can be bound by the deeds of their agents. An agent’s authority to enter into transactions on behalf of the business entities can be ACTUAL, IMPLIED, or APPARENT.

Actual Express Authority

Actual authority is authority that the principal has intentionally given to an agent who has accepted it.

  • Authority that has been lawfully and explicitly granted by the principal either orally or in writing;

  • Authority plainly conferred to another and not presumed from circumstances.

Implied Authority

Implied authority results because of the agent’s relationship with the principal or the principal’s business, from custom, past practice or by acquiescence. For example, a principal might not have intentionally authorized an employee to make purchases for the business entity on credit. If the principal has repeatedly paid off these debts incurred by the employee, the principal may inadvertently have created implied authority in that employee.

Apparent Authority

That which, though not actually granted, the principal knowingly permits the agent to exercise. Doctrine that a principal is responsible for the acts of his agent where the principal by his words or conduct suggests to a third person that the agent may act in the principal’s behalf, and where the third person believes in the authority of the agent. Apparent authority is the “power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from, and in accordance with, the other’s manifestations to such third persons.” Apparent authority may come about if a principal acts in a way that would make a third party reasonably to believe that the agent had authority. For example if a business owner knows that a person is claiming authority to act on behalf of the business, the principal may have an obligation to explain that the employee really is not authorized to transact business for the business.