Notes

The Texas Supreme Court summarized the law concerning apparent authority:

Apparent authority, we have said, is based on estoppel, arising “either from a principal
knowingly permitting an agent to hold [himself] out as having authority or by a principal’s actions
which lack such ordinary care as to clothe an agent with the indicia of authority, thus leading a
reasonably prudent person to believe that the agent has the authority [he] purports to exercise.”
Baptist Mem. Hosp. Sys. v. Sampson, 969 S.W.2d 945, 948 (Tex. 1998). We have further noted that
the principal’s full knowledge of all material facts is essential to establish a claim of apparent
authority based on estoppel. Rourke v. Garza, 530 S.W.2d 794, 803 (Tex. 1975) (citing Hallmark
v. United Fid. Life Ins. Co., 286 S.W.2d 133 (Tex. 1956)). Moreover, when making that
determination, only the conduct of the principal is relevant. NationsBank, N.A. v. Dilling, 922
S.W.2d 950, 953 (Tex. 1996) (per curiam). Finally, the standard is that of a reasonably prudent
person, using diligence and discretion to ascertain the agent’s authority. Chastain v. Cooper & Reed,
257 S.W.2d 422, 427 (Tex. 1953). Thus, to determine an agent’s apparent authority we examine the
conduct of the principal and the reasonableness of the third party’s assumptions about authority.

Gaines v. Kelly, No. 05-1092 (Tex. Aug. 24, 2007) (reversing court of appeals’ reversal of summary judgment and rendering judgment in favor of defendant; mortgage broker did not have apparent authority to commit lender to fund a loan).