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 Rhode Island, as in other jurisdictions, the principal-agent relationship is governed by common law principles of agency, which may be supplemented by state statutes in specific contexts. A principal can give an agent authority to act on their behalf and enter into contracts or legal obligations within the scope of the agency. This authority can be 'actual authority,' which is expressly granted by the principal to the agent, either in writing or verbally. Alternatively, an agent may have 'apparent authority,' which arises when a principal's actions or omissions create a reasonable impression in third parties that the agent is authorized to act. For example, if a principal knowingly allows an agent to act in a certain way over a period of time, the principal may be estopped from denying the agent's authority in future similar transactions. Rhode Island courts will look at the interactions between the principal, the agent, and third parties to determine whether apparent authority exists. It's important for principals to clearly define and communicate the extent of an agent's authority to prevent unauthorized actions that could legally bind them.