OSTENSIBLE AUTHORITY


Ostensible authority is a legal term that refers to the authority which a third person can reasonably assume that an agent has on the basis of actions or inactions of the principal.

This is so despite the fact that the agent may not have actual authority. A third person may justifiably rely on appearances and is not bound by secret instructions of the principal to the agent.

Consider the case where John delivers a car to Honest Joe, a used car dealer. Honest Joe is instructed to sell the car for no less than $1,000. Honest Joe sells the car for $750 to Pam. Joe had apparent authority to sell the car at any price from the viewpoint of an innocent third-party purchaser. John, therefore, cannot refuse to deliver the title to Pam despite the fact that Honest Joe failed to obey his instructions.

In the context of real estate, ostensible authority can arise when a third party reasonably believes that an agent has the authority to act on behalf of the principal, even if the agent does not have actual authority. For example, if a real estate agent presents themselves as an authorized representative of a property owner, a third party may reasonably believe that the agent has the authority to enter into a contract on behalf of the owner. If the agent does not have actual authority, the owner may still be bound by the contract if the third party relied on the agent’s ostensible authority.

In summary, ostensible authority is a legal term that refers to the authority which a third person can reasonably assume that an agent has on the basis of actions or inactions of the principal. In the context of real estate, ostensible authority can arise when a third party reasonably believes that an agent has the authority to act on behalf of the principal, even if the agent does not have actual authority.


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