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 New Mexico, 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 within the scope of the agency relationship. This authority can be actual authority, which is explicitly given to the agent by the principal, either in writing or verbally, to perform certain acts. Alternatively, the agent may have apparent authority, which arises when a third party reasonably believes the agent has the authority to act on behalf of the principal, based on the principal's representations or conduct. If an agent acts within the scope of their actual or apparent authority, the principal is typically bound by the agent's actions and contracts entered into on their behalf. However, if the agent exceeds their authority, the principal may not be bound unless they ratify the agent's actions. New Mexico statutes and case law would provide specific applications of these general principles of agency law.