When an individual or business hires an agent to represent them in a transaction, it is important to establish the scope of the agent`s authority through an agency contract. This contract outlines the responsibilities and limits of the agent, ensuring that both parties understand their obligations and can avoid misunderstandings or conflicts.

The agent`s authority described in an agency contract is a critical component of the agreement. It defines the agent`s power to act on behalf of the principal (the individual or entity they are representing) and make decisions that affect the principal`s interests.

There are generally two types of agency authority: actual authority and apparent authority. Actual authority is the power granted to the agent by the principal through the agency contract or by subsequent instructions. This authority may be express, where it is specifically stated in the contract or agreed upon separately, or implied, where it can be reasonably inferred from the principal`s instructions or the nature of the transaction.

Apparent authority, on the other hand, is the power that the agent appears to have to third parties based on the principal`s actions or representations. For example, if the principal allows the agent to conduct negotiations and make deals with potential customers, even though it is not specifically stated in the contract, then the agent has apparent authority to act in this capacity.

The agent`s authority may also be limited in specific ways. For example, the contract may state that the agent cannot enter into contracts over a certain dollar amount without the principal`s approval, or that the agent cannot make decisions that would substantially alter the nature of the transaction.

It is important for both the principal and the agent to understand the scope of the agent`s authority, as well as any limitations, to ensure that the transaction is conducted in accordance with the principal`s wishes and to avoid any legal issues that may arise from overstepping the agent`s bounds.

In conclusion, the agent`s authority described in an agency contract is a critical component of the agreement between the principal and the agent. It defines the agent`s power to act on behalf of the principal and make decisions that affect their interests, and may be actual or apparent, express or implied, and limited in specific ways. Understanding the agent`s authority is crucial for ensuring that the transaction is conducted in accordance with the principal`s wishes and avoiding any legal complications.