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 West Virginia, 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. The agent's power to bind the principal to contracts and legal obligations is contingent upon the type of authority granted. Actual authority is explicitly given by the principal to the agent, either in writing or verbally, to perform certain acts. Apparent authority, on the other hand, arises when a principal's conduct reasonably leads a third party to believe that the agent is authorized to act, even if the agent does not have actual authority. This can occur if the principal knowingly allows the agent to exercise certain powers or if the principal's actions or inactions suggest such authority. In West Virginia, 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 held liable unless they ratified the agent's actions or created the impression that such actions were within the agent's authority.