When can a principal be bound by an agent who acted beyond internal instructions?

A principal can be bound by an agent acting beyond internal instructions through the doctrine of apparent authority.1

While the principle of private autonomy suggests that only an actually authorized agent should create legal obligations for a principal, this is often impractical for third parties who cannot verify every detail of an agent's internal authorization. Consequently, a principal may be bound when they have made a manifestation of the agent’s authority that leads a third party to reasonably believe the agent is acting within their power.1

Key factors include:
* Reliance on Position: A third party may rely on the fact that an agent holds a specific role (such as a partner or employee), assuming the normal incidents of authority associated with that position are present, even if the principal has imposed special internal restrictions.1
* Prior Declarations: A third party may rely on an earlier authorization that the principal has since revoked internally without the third party's knowledge.1
* Risk Apportionment: Because agency functions efficiently for the benefit of the principal, the law often requires the principal to bear the risk of an agent’s unauthorized acts when a third party has reasonably relied on the appearance of authority.1