How can an agent make a contract that legally binds a principal?

In the law of agency, an agent can legally bind a principal to a contract primarily through the authority granted to them to act on the principal's behalf. This process generally functions in the following ways:12

• Actual Authority: A principal may grant an agent the power to act through an express agreement, such as a written power of attorney, or through implied authority derived from the principal's conduct or an established course of dealing. When an agent acts within this authorized scope, the resulting contract binds the principal, and the agent typically remains outside the contractual relationship.2
• Apparent Authority: Even if an agent lacks actual authority, they may still bind a principal if the principal has manifested the agent’s authority to a third party. If a third party reasonably relies on the agent's position or the principal's representations, the law may hold the principal bound to the contract to protect the third party's interests.13
• Disclosure: In many jurisdictions, particularly under continental law, an agent must act openly in the principal's name to bind them. However, in common law, an undisclosed principal may sometimes be bound by or entitled to enforce a contract made by an agent in the agent's own name.4