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 Alaska, 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. When a principal explicitly grants authority to an agent, this is known as actual authority, and the agent can legally bind the principal to contracts and other obligations within the scope of that authority. Apparent authority, on the other hand, arises when a principal's conduct leads third parties to reasonably believe that an 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 act in a certain way or fails to correct the impression that the agent has certain powers. In Alaska, 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 for the agent's unauthorized acts unless the principal ratifies those actions, either expressly or by implication, such as by accepting the benefits of the transaction.