What does it mean when the authority is 'implied' in an agency relationship?

In an agency relationship, when authority is described as 'implied,' it refers to authority that is not explicitly stated in words or formalized through documentation but is instead understood or inferred from the actions, conduct, or circumstances surrounding the relationship. This type of authority can arise when the agent's actions suggest that they have the power to act on behalf of the principal, even if the specific authority is not formally granted through a written or verbal agreement.

For example, if a business owner regularly allows a manager to make decisions regarding day-to-day operations without explicitly outlining each individual authority, the manager may have implied authority to act in these circumstances based on the owner's consistent behavior. This understanding is crucial in agency relationships because it recognizes the ability of the agent to operate effectively within the bounds of their position, ensuring that transactions can proceed smoothly without needing constant direct instructions for every action taken.