Understanding the Legal Definition of Scope of Authority: A Must-Know for Business Owners to Avoid Legal Consequences

As a business owner, it is important to understand the legal definition of scope of authority. This term refers to the powers given to an agent by the principal, which includes both the authority specifically designated and any implied or inferred authority.

For example, if a business owner hires an employee to handle sales, the scope of authority for that employee would include the power to negotiate prices and close deals on behalf of the company. However, if the employee were to make a decision outside of their scope of authority, such as signing a contract without proper approval, the business owner could potentially face legal consequences.

It is important for business owners to clearly define the scope of authority for their employees and agents to avoid any misunderstandings or legal issues. This can be done through written contracts or job descriptions that outline specific duties and limitations.

It is also important to note that in some cases, an agent may claim that their scope of authority is greater than what is written down and recorded. In these instances, it is important to carefully review the situation and determine if the agent had any implied or inferred authority.

Talk to a Fitter Law attorney: understanding the legal definition of scope of authority is crucial for business owners to protect their company and avoid any legal issues. By clearly defining the powers and limitations of employees and agents, business owners can ensure that everyone is on the same page and working towards the same goals

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