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 Ohio, 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, which includes entering into contracts and incurring other legal obligations within the scope of the agency. An agent's authority to bind the principal can be actual authority, which is the power the principal has expressly given to the agent, or apparent authority, which arises when a third party reasonably believes the agent has the power to act on behalf of the principal, based on the principal's conduct or statements. 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. Ohio courts will look at the interactions between the principal, the agent, and any third parties to determine whether the agent had the necessary authority to bind the principal. It's important for principals to clearly define and communicate the extent of an agent's authority to prevent unauthorized acts and potential legal disputes.