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 Oregon, 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 can include 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 the principal's conduct 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 principle of apparent authority. Oregon law requires that the agent act within the scope of their authority and in the principal's best interest, and the principal may be liable for the agent's actions that are within the scope of their agency.