Legal Definitions - scope of authority

Scope of authority refers to the boundaries of actions and decisions that an individual (the agent) is legally empowered to make on behalf of another person or entity (the principal).

This concept includes both the specific powers explicitly granted to the agent, as well as those powers that are reasonably necessary or commonly expected for the agent to perform their assigned duties and fulfill the principal's business objectives. Essentially, it defines what an agent is allowed to do when acting for someone else.

• Example 1: Retail Store Manager

  A manager at a large electronics store is authorized by the store owner (the principal) to oversee daily operations, manage staff, and handle customer service issues. The manager's scope of authority would typically include approving customer returns, offering a small discount to resolve a complaint, or ordering standard inventory items when stock runs low. However, it would likely not extend to selling the store's building, changing the company's entire pricing structure, or signing a major lease agreement for a new location, as these actions fall outside the reasonable powers delegated to a store manager.

• Example 2: Real Estate Agent

  A homeowner hires a real estate agent to sell their house. The agent's scope of authority would include listing the property, marketing it to potential buyers, conducting open houses, and presenting offers to the homeowner. The agent might also be authorized to negotiate minor terms of a sale within a pre-approved range (e.g., a slight reduction in price or inclusion of certain appliances). However, without explicit, written permission, the agent would not have the authority to accept an offer on behalf of the homeowner or sign a sales contract, as these are major decisions reserved for the principal.

• Example 3: Corporate Procurement Officer

  A procurement officer for a manufacturing company is tasked with sourcing raw materials and negotiating supply contracts. Their scope of authority would involve researching suppliers, requesting bids, negotiating prices and delivery schedules, and signing purchase orders up to a certain financial limit set by the company. They might also be authorized to approve minor changes to existing contracts. However, they would not have the authority to unilaterally approve a multi-million dollar merger with another company or decide to switch the company's entire product line, as these strategic decisions are beyond the typical delegated powers of a procurement officer.