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 Montana, as in other states, the principal-agent relationship is governed by principles of agency law. The principal grants the agent the authority to act on their behalf and to enter into contracts and other legal obligations within the scope of the agency. This authority can be 'actual authority,' which is expressly given to the agent by the principal, or 'apparent authority,' which arises when the principal's behavior leads third parties to reasonably believe that the agent is authorized to act. For example, if a principal knowingly allows an agent to act in a certain way over a period of time, the principal may be bound by the agent's actions, even if the specific act was not expressly authorized, due to the doctrine of apparent authority. Montana law recognizes both actual and apparent authority, and principals can be obligated by the acts of their agents when such authority is established. It's important for principals to clearly define the scope of an agent's authority and to communicate any limitations to third parties to avoid unintended obligations.