Actual Authority

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. Power Of Attorney

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

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

    The level of power entrusted to a broker or agent granting specific ...
  6. Implied Authority

    An agent with the jurisdiction to perform acts which are reasonably ...
Related Articles
  1. Personal Finance

    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. Managing Wealth

    Understanding the Principal-Agent Relationship

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

    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. Investing

    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. Retirement

    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.
  7. Markets

    What Is Purchasing Power?

    Purchasing power expresses money’s value by defining the amount of goods or services it can buy.
  8. Markets

    What Does Principal Mean?

    For banks, principal refers to the amount due on a loan, and is used to calculate interest payments.
  9. Retirement

    Buying A Home: Find An Agent

    By Amy FontinelleIf you want to buy a home, you'll need to get an agent. The most basic reason to get an agent is that you won't be able to see homes without one. (To learn more, readDo You Need ...
  10. Personal Finance

    Finding A Good Real Estate Agent

    Don't go it alone in the real estate market. We'll show you how to find the help you need.
RELATED FAQS
  1. What are the responsibilities of the principal in a company?

    Learn to differentiate between some of the many definitions and responsibilities of a "principal" as it relates to business ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. What is the difference between authorized shares and outstanding shares?

    Calculating financial ratios can help investors understand a company's financial position, but only when a knowledge of various ... Read Answer >>
  5. 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 >>
  6. 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 >>
Trading Center