In a principal-agent relationship, the principal gives the agent authority to act on behalf of the principal, and to bind or obligate the principal to contracts and other legal obligations, as permitted by the scope of the agency (authority). An agent’s authority may be sufficient to bind or obligate the principal if the authority was expressly given to the agent (actual authority), or if it was implied to other persons that the agent had authority to act on behalf of the principal (apparent authority)—such as by the principal’s adoption of the agent’s prior actions on behalf of the principal.

In Arkansas, as in other states, the principal-agent relationship is governed by common law principles of agency, which are also reflected in various statutes. The principal gives the agent authority to act on their behalf, which includes entering into contracts and creating other legal obligations within the scope of the agency. An agent's authority to bind the principal can be actual authority, which is explicitly granted by the principal to the agent, or apparent authority, which arises when the principal's conduct leads third parties to reasonably believe that the agent has the authority to act on behalf of the principal. This could occur, for example, if the principal knowingly allows the agent to act in a certain way or fails to correct the impression that the agent has certain powers. Arkansas courts will look at the interactions between the principal, the agent, and the third parties to determine whether an agent had the authority to bind the principal. It's important to note that the principal can be held liable for the acts of the agent that are within the scope of the agency, even if the principal did not expressly authorize the specific act.