Actual authority is authority that the principal (the entity or person being bound) has expressly or impliedly granted to the agent (the person signing). Express actual authority comes from a direct grant — a board resolution, an operating agreement provision, a written authorization, or explicit instructions. Implied actual authority arises from the agent's role and the reasonable understanding of what that role entails.

A CEO typically has implied actual authority to enter ordinary business contracts on behalf of a corporation. A purchasing manager typically has implied actual authority to enter supply agreements within their normal scope. Whether a particular transaction falls within implied authority depends on the agent's role, the entity's practices, and the nature of the transaction.

Apparent authority arises when the principal's conduct leads a third party to reasonably believe that the agent has authority, even if actual authority was not granted. If a company holds out an employee as having authority to negotiate contracts, and a third party reasonably relies on that representation, the company may be bound even if the employee lacked actual authority.

Apparent authority protects third parties who deal in good faith with agents who appear to have authority. It does not protect third parties who have reason to know the agent lacks authority, or who fail to make reasonable inquiry when the circumstances warrant it.

For corporations, authority to bind the entity is typically governed by the articles of incorporation, bylaws, and board resolutions. Major transactions — real estate, significant debt, mergers — often require board or shareholder approval.

For LLCs, authority is governed by the operating agreement and Florida's LLC statute. In a member-managed LLC, members generally have authority to bind the LLC in ordinary business matters. In a manager-managed LLC, managers have that authority and members generally do not.

For partnerships, each general partner typically has authority to bind the partnership in ordinary business matters. Limited partners in a limited partnership generally do not have authority to bind the partnership.

A contract signed by an agent who lacked both actual and apparent authority generally does not bind the principal. The principal may ratify the unauthorized contract — expressly or by accepting its benefits — in which case it becomes binding.

The unauthorized signer may be personally liable to the third party for breach of the implied warranty of authority. This is a separate claim against the individual, not the entity.

Third parties dealing with entities should verify authority before relying on a signature, particularly for significant transactions. Requesting a certificate of authority, a board resolution, or an operating agreement excerpt is standard practice in commercial transactions.

Authority questions arise when a party disputes whether a contract binds an entity, when a transaction requires board or member approval, and when a counterparty's representative's authority is unclear.

Before entering a significant contract with a business entity, verifying the signer's authority — and ensuring your own representative has authority — is a basic due diligence step. An attorney can review governing documents and advise on what authorization is needed.

Stewart Law reviews and drafts contracts for Florida businesses. See the contract review service or contact us to discuss a specific agreement.