Implied Authority of Contract

Implied Authority of Contract is a legal term. In contract law, it is the implied ability of an individual to make a legally binding contract on behalf of an organization, by way of uniform or interaction with the public on behalf of that organization. When a person is wearing a uniform or nametag bearing the logo or trademark of a business or organization; or if that person is functioning in an obviously authorized capacity on behalf of a business or organization, that person carries an Implied Authority of Contract.

For example, if you are at a restauraunt and your waitress tells you that she can give you a free beverage if you pay for an entree, she has made a contract with you on behalf of the business by which she is employeed. It is implied that she is given the authority to do so by the fact that she is the sole employee of the business who has been designated to complete a transaction with you. (Whether or not other employees ultimately get involved in your transaction is irrelevant, because it is expected that ideally she is the only person required to complete your business.)

Continuing the scenario, suppose that a manager were to come to your table and inform you that your waitress has made a mistake; that the "free beverage w/ paid entree" offer has expired and that you will be expected to pay for your beverage. At this point the business is in direct violation of a legally enforceable contract made between you, the client, and their employee.

They may penalize the employee for the mistake, but Implied Authority of Contract places them under a legal obligation to honor the terms of the agreement.

The same principle applies to more complex or extreme legal circumstances.