In a principal-agent relationship, the principal gives the agent authority to act on behalf of the principal, and to bind or obligate the principal to contracts and other legal obligations, as permitted by the scope of the agency (authority). An agent’s authority may be sufficient to bind or obligate the principal if the authority was expressly given to the agent (actual authority), or if it was implied to other persons that the agent had authority to act on behalf of the principal (apparent authority)—such as by the principal’s adoption of the agent’s prior actions on behalf of the principal.

In Arizona, as in other states, the principal-agent relationship is governed by principles of agency law. The principal grants the agent the authority to act on their behalf within the scope of the agency. This authority can be actual authority, which is expressly given by the principal to the agent, or apparent authority, where the principal's conduct suggests to third parties that the agent is authorized to act on their behalf. Actual authority is typically outlined in a contract or agreement, detailing the agent's powers and duties. Apparent authority arises when a principal's actions (such as allowing the agent to act in a certain role) lead others to reasonably believe the agent is authorized to act on behalf of the principal. If an agent acts within the scope of their actual or apparent authority, they can bind the principal to contracts and other legal obligations. It's important to note that the principal can also be bound by the agent's actions if the principal ratifies those actions, even if the agent exceeded their authority. Arizona law requires that the principal-agent relationship and the extent of authority be clearly established to determine the liability and obligations of the parties involved.