Revoking Apparent Authority in Executive Severance Agreements
Apparent authority binds the principal to third parties until direct notice or administrative act extinguishes the reasonable belief of agency.
trade reliance
Meaning
Commercial legal doctrines protect third parties who enter contracts based on reasonable beliefs created by a company’s overt representations. Managing trade reliance requires clear public notices when a founder resigns so business partners do not assume continuous legal agency. This commercial expectation validates contracts signed by former officers whose apparent authority was never disclaimed.
The rule protects external counterparties acting in good faith while excluding parties with actual knowledge of executive departures.
Commercial Expectation
Market participants rely on established executive positions when entering supply contracts and lease agreements. Demonstrating trade reliance requires showing that a third party reasonably believed an individual possessed authority based on past corporate conduct. Written disclaimers and updated registry filings eliminate reasonable assumptions of ongoing agency.
Apparent Authority
Uncorrected corporate representations create enforceable obligations even after internal resignations occur. When an enterprise allows a former founder to negotiate agreements without objection, trade reliance binds the organization to those commercial commitments. Public disclaimers eliminate reasonable reliance and shield the enterprise from unapproved debts.
Clear notice terminates apparent authority.
Risk Allocation
Equity protects innocent commercial partners who transact without knowledge of internal leadership shifts. Timely notices reallocate risk to counterparties who ignore formal announcements.