What is ostensible agency?
How do you legally define it?
What are the important elements that you must know!
In this article, we will break down the legal definition of “ostensible agency”, so you know all there is to know about it!
We will look at the meaning of ostensible agency, what is an ostensible agent, how it’s important in real estate and in the medical field, we’ll look at the ostensible authority definition and more!
Stick around as we’ve got definitions, examples, legal concepts and more to explain!
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Let’s get started!
What is ostensible agency
Ostensible agency (also referred to as apparent authority) is a term that refers to a situation when a third party is led to believe that a person was acting as the agent or on behalf of another.
In the context of an ostensible agency, the third party is not formally aware of the actual legal relationship between the ostensible agent (person appearing to be the agent of another) and the person or entity believed to be the principal.
Suzanne presenting herself as the General Manager of operations of Company ABC and wearing the company’s uniform could be viewed as an ostensible agent of the company.
Third parties could reasonably believe that she is an employee or a manager employed by the company.
However, in reality, Suzanne is an independent service provider of the Company ABC and not an employee.
In the ostensible agency context, what is important is how third parties reasonably perceive Suzanne combined with the perceived authority given by the principal to the agent in words or by conduct.
In this context, since she was presenting herself as a company manager and even had a company uniform, it is reasonable for third parties to believe that she is acting on behalf of the Company ABC.
Ostensible agency definition
How do you define ostensible agency?
An ostensible agency refers to the “apparent relationship” that exists between a person appearing to act as the agent of another.
Here is an ostensible agency example:
Mary hires a contractor to have her kitchen renovated.
She hires Jack who is the president of Jack’s Top Kitchen Inc to get the job done.
Jack’s company, in turn, hires Bob as a subcontractor to handle some of the kitchen renovation work.
However, from Mary’s perspective, Bob “appears” to be working for Jack’s Top Kitchen Inc as an employee as he already knows the kitchen renovation plans, shows up along with the other employees of the company and does not disclose anything to Mary.
In this situation, Bob is an ostensible agent of Jack’s Top Kitchen Inc as he is perceived to be the agent of the company.
Ostensible agent definition
According to Law.com’s Legal Dictionary, an ostensible agent is defined as:
A person who has been given the appearance of being an employee or acting (an agent) for another (principal), which would make anyone dealing with the ostensible agent reasonably believe he/she was an employee or agent.
An ostensible agent refers to the actual person or entity that is perceived to be acting as the agent of another (the principal).
The ostensible agent has an ostensible authority to act on behalf of someone or represent someone.
Ostensible agency real estate
Why is the notion of ostensible agency important in real estate?
The notion of agency is important in real estate.
Typically have several stakeholders in the context of a real estate transaction that may lead to a party to be perceived as an ostensible agent of another.
When the parties’ actual relationship is not clear, you may intentionally or negligently create a context where a party to the transaction may have reasonably perceived another as the ostensible agent of another.
This can lead to civil lawsuits and disputes between buyers and sellers but can also lead to professional liability claims against the real estate agents or brokers.
It is quite simple to avoid ostensible agency liability.
The best practice is for all parties to clearly announce their respective relationships in relation to one another so there is no legal liability resulting from an apparent authority.
Ostensible agency doctrine
The ostensible agency liability doctrine (or the ostensible agency theory) is used in the medical field, particularly in medical malpractice cases.
There are many instances when an ostensible agency relationship may be formed.
For instance, a physician contractor could be perceived as the apparent agent of the hospital.
In essence, a patient being treated by a physician in the hospital will be led to believe that the physician is an agent of the hospital and acting on its behalf.
Even though the physician was a contractor vis-à-vis the hospital, third parties can reasonably believe that the physician was employed by and acting on behalf of the hospital.
As such, should the contractor physician cause injuries to a patient due to professional malpractice or professional errors, the hospital can be held responsible for his or her actions.
Ostensible agency takeaways
So what is the legal definition of ostensible agency?
What is an ostensible agent?
What is the legal relationship created between an ostensible agent and a principal?
In essence, you have an ostensible agency when:
- A principal has made representations through words or conduct that the agent can act on its behalf (regardless of the fact that the agent was not authorized to do so)
- A third party relied on such reasonable representations to deal with the agent
- The third-party would not have dealt with the agent without such representations
The legal consequences of ostensible agency relationships are quite important.
Based on the vicarious liability doctrine, any damages, injuries or harm caused by an ostensible agent to a third party will be assigned to the principal.
Similarly, the ostensible agent will also inherit fiduciary duties when acting on behalf of another.
To avoid any surprises, it’s important to evaluate your relationship with others and assess whether or not the creation of an ostensible agency can lead to unwanted legal exposure.