What Is a Principal?
In agency law, a principal is the person or entity who authorizes another — an agent — to act on their behalf. The principal grants the authority, and acts the agent takes within that authority bind the principal as if the principal had done them personally. The relationship is the foundation of how businesses, real estate deals, and powers of attorney operate.
The Principal-Agent Relationship
- The principal defines the scope of the agent's authority
- The agent owes the principal fiduciary duties of loyalty and care
- The principal is generally bound by and liable for the agent's authorized acts
Types of Authority
An agent may act with actual authority (expressly granted or reasonably implied) or apparent authority (where the principal's conduct leads a third party to reasonably believe the agent is authorized). A principal can also adopt an unauthorized act after the fact through ratification. Note that "principal" in agency is different from the "principal" of a loan, which refers to the original amount borrowed.
Related Terms
- Agent — The party who acts for the principal
- Ratification — How a principal adopts an unauthorized act
- Power of Attorney — A written grant of agency authority
- Fiduciary Duty — What an agent owes the principal
Barnes Walker
Barnes Walker's attorneys advise Florida principals and agents on authority, powers of attorney, and agency disputes. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC