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. Power Of Attorney

    A legal document giving one person (called an "agent" or "attorney-in-fact") ...
  3. Trading Authorization

    The level of power entrusted to a broker or agent granting specific ...
  4. Full Trading Authorization

    A level of trading authorization that grants an agent or broker the ...
  5. Agency Theory

    A supposition that explains the relationship between principals ...
  6. Agency Problem

    A conflict of interest inherent in any relationship where one ...
Related Articles
  1. Investing

    Understanding the Principal-Agent Relationship

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

    Agency Theory

    An agency relationship exists when one person -- called a principal -- hires another person -- the agent -- to act on his behalf. Agency theory is concerned with resolving problems that develop ...
  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. 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.
  5. 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.
  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. 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.
  8. Investing

    What Does Principal Mean?

    For banks, principal refers to the amount due on a loan, and is used to calculate interest payments.
  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 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 >>
  2. 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 >>
  3. How does agency theory propose to deal with the agency problem?

    Learn more about agency theory and how businesses may use it to understand employee-employer relations. Find out more about ... Read Answer >>
  4. Do real estate agents get paid hourly or by salary?

    Learn about real estate commissions and how real estate agents, including listing agents, buyer's agents and real estate ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  5. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
Trading Center