DEFINITION of 'Actual Authority'

Specific powers, expressly conferred by a principal (often an insurance company) to an agent to act on the principal's behalf. This power may be broad, general power or it may be limited, special power.

Also known as "express authority."

BREAKING DOWN 'Actual Authority'

Actual authority arises where the principal's words or conduct rationally cause the agent to believe that he or she has been empowered to act. An agent receives actual authority either orally or in writing. Written authority is preferable, as it is somewhat difficult to establish authority that is given verbally. In a corporation, written express authority includes bylaws and resolutions from directors' meetings which grant the authorized person permission to carry out a definite act on behalf of the corporation.

RELATED TERMS
  1. Special Power Of Attorney

    A special power of attorney grants an agent the authority to ...
  2. Financial Power Of Attorney

    A financial power of attorney grants a trusted agent the authority ...
  3. Limited Trading Authorization

    A level of trading authorization that gives an agent or broker the ...
  4. Trading Authorization

    The level of power entrusted to a broker or agent granting specific ...
  5. Agency Theory

    A supposition that explains the relationship between principals ...
  6. Full Trading Authorization

    A level of trading authorization that grants an agent or broker the ...
Related Articles
  1. Taxes

    What's IRS Form 2848 Used For?

    It's a power of attorney tax form and here's what it can, and cannot, do.
  2. Investing

    Understanding the Principal-Agent Relationship

    In a principal-agent relationship, one party hires another to act on the former’s behalf.
  3. Retirement

    Don't Give Away Control Over Your Assets Without Planning

    Most people don't realize what they agreed to when they signed a power of attorney, and are blissfully unaware of the possible harm from poor planning.
  4. Small Business

    What are Principal-Agent Problems?

    Principal-agent problems arise when a principal employs an agent to perform duties that conflict with the agent’s best interests.
  5. Managing Wealth

    Why Designate a General Power of Attorney?

    Because it will ensure your financial and personal affairs are handled according to your wishes should you ever be incapacitated or unavailable.
  6. Financial Advisor

    How to Find the Best Life Insurance Agent

    Choosing a life insurance agent is the first and most important step in obtaining coverage. Buyers should pay attention to five key factors.
  7. Managing Wealth

    Medical Power of Attorney: Which Child to Choose?

    Don’t compromise for the sake of family harmony when you pick an adult child to fill this role. But be sure you fully explain your decision to all.
  8. Investing

    Do You Need A Real Estate Agent?

    There's no guarantee that realtors will act in your best interest, but it may be worth hiring one anyway.
  9. Insurance

    How to Become a Life Insurance Agent

    The pros and cons of becoming a life insurance agent, a field that can be hard to crack—but that can pay off big when you do.
RELATED FAQS
  1. What is the role of agency theory in corporate governance?

    Understand how businesses use agency theory in corporate governance. Learn how moral hazard problems may be addressed using ... Read Answer >>
  2. What is authorized stock?

    Authorized stock represents the maximum number of common shares that can be issued legally by the company as stated in the ... Read Answer >>
  3. Do employers use agency theory in labor relations?

    Learn more about how agency theory works and how it is used to illustrate relationships between principals and agents in ... Read Answer >>
Hot Definitions
  1. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  2. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  3. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  4. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  5. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  6. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
Trading Center