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 Ohio, 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 and to enter into contracts and other legal obligations within the scope of the agency. This authority can be 'actual authority,' which is explicitly given to the agent by the principal, or 'apparent authority,' where the principal's conduct suggests to third parties that the agent is authorized to act on their behalf. Apparent authority arises when a principal's actions lead others to reasonably believe that the agent is authorized to act. 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 obligated, unless they ratify the agent's actions after the fact. It's important for principals to clearly define the scope of an agent's authority and for third parties to verify the extent of an agent's authority when entering into agreements.