Legal Definitions - institorial power

Institorial power refers to the authority that an owner of a business grants to a manager or agent to conduct the day-to-day operations of that business or a specific part of it. This power allows the manager to enter into contracts and make decisions that legally bind the owner, even if the owner isn't directly involved in every transaction, as long as those actions fall within the scope of managing the business. It is often an implied power derived from the manager's position, rather than requiring explicit approval for every single action.

Here are some examples to illustrate this concept:

• Imagine a small chain of coffee shops owned by Ms. Chen. She hires Mr. Lee as the general manager for one of her busiest locations. Mr. Lee, acting under his institorial power, regularly orders coffee beans and milk from suppliers, hires and fires baristas, and approves the schedule for staff. When he signs a contract with a new local bakery to supply pastries, Ms. Chen is legally bound by that agreement, even if she didn't personally review or sign the contract, because ordering supplies is a standard part of managing a coffee shop.

• Consider a large software development company that assigns Ms. Rodriguez as the project lead for a new mobile application. In her role, Ms. Rodriguez has institorial power to make decisions necessary for the project's completion. This includes authorizing the purchase of specific development tools, negotiating deadlines with clients, and allocating tasks among her team members. If she approves a change order with a client that incurs additional costs for the company, the company is legally obligated to honor that change because it falls within her authority as project lead.

• Think of a car dealership owned by Mr. Davies. He employs Mr. Kim as the sales manager. Mr. Kim's institorial power allows him to set daily sales targets, authorize discounts on vehicles within a certain range, and approve trade-in values for used cars. If Mr. Kim agrees to sell a car to a customer at a discounted price, Mr. Davies' dealership is legally bound to honor that price, even if Mr. Davies was not present during the negotiation, because these actions are typical responsibilities of a sales manager at a car dealership.