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 New York, as in other jurisdictions, the principal-agent relationship is governed by common law principles and state statutes. The principal grants the agent authority to act on their behalf within the scope of the agency. This authority can be 'actual authority,' which is explicitly given to the agent, or 'apparent authority,' where the principal's conduct suggests to third parties that the agent is authorized to act. Actual authority is derived from the principal's direct instructions to the agent, while apparent authority arises from the principal's representations to third parties that create a reasonable belief that the agent is authorized to act. If an agent acts within the scope of their actual or apparent authority, the principal is typically bound by the agent's actions. However, if an agent exceeds their authority, the principal may not be obligated unless they ratify the agent's actions or are estopped from denying the agent's authority due to their own conduct. New York courts will look at the interactions between the principal, agent, and third parties to determine whether the agent had the authority to bind the principal.