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 Connecticut, 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. An agent with 'actual authority' has been explicitly granted the power to make decisions and enter into agreements that legally bind the principal. This authority can be conferred either in writing or verbally. 'Apparent authority' occurs when a principal's actions or communications suggest to third parties that an agent is authorized to act, even if the agent does not have actual authority. This can happen if the principal knowingly allows the agent to exercise certain powers or if the principal's behavior would lead a reasonable person to believe that the agent has such authority. In cases where an agent exceeds their authority, the principal may still be bound by the agent's actions if they later adopt or ratify those actions. It is important for principals to clearly define the scope of an agent's authority and for third parties to verify that authority when entering into contracts or other legal obligations.