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 Wisconsin, as in other states, the principal-agent relationship is governed by common law principles and state statutes that define the extent of authority an agent has to act on behalf of a principal. Actual authority is explicitly granted by the principal to the agent, either in writing or verbally, to perform certain acts or conduct transactions. Apparent authority, on the other hand, arises when a principal's conduct or statements lead a third party to reasonably believe that the agent is authorized to act, even if such authority has not been expressly given. This can occur 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. In Wisconsin, if an agent acts within the scope of their actual or apparent authority, the principal is typically bound by the agent's actions. However, the specifics of each situation can vary, and it is often advisable to consult with an attorney to understand the full legal implications of agency relationships and the authority granted to agents.