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 Texas, the principal-agent relationship is governed by principles of agency law, which allow a principal to authorize an agent to act on their behalf and enter into binding agreements. An agent's authority to bind the principal can be actual authority, explicitly granted by the principal, or apparent authority, where the principal's conduct suggests to third parties that the agent is authorized to act. Actual authority is the direct power given to the agent by the principal through either a written or oral agreement. Apparent authority arises when a principal's actions lead a third party to reasonably believe that the agent is authorized to act, even if the agent does not have actual authority. This can occur through the principal's acquiescence or lack of objection to the agent's actions. It's important for principals to clearly define the scope of an agent's authority and for third parties to verify the extent of an agent's power to bind the principal in Texas.