General authority: Overview, definition, and example
What is general authority?
General authority refers to the broad power or discretion granted to a person or entity to make decisions, take actions, or execute duties on behalf of another party. This authority typically applies to routine or standard business activities and can be given to employees, agents, or officers to act in the best interest of the principal. General authority is usually distinguished from specific authority, which is limited to particular tasks or actions.
For example, a company's CEO may have general authority to sign contracts, manage day-to-day operations, and make financial decisions without needing explicit approval for each individual action.
Why is general authority important?
General authority is important because it enables individuals to act on behalf of a business or organization in a way that supports operational efficiency and decision-making. It ensures that the organization can function smoothly by empowering key personnel to take action when necessary, without needing to seek approval for each decision.
For businesses, general authority provides flexibility and expedites decision-making. For employees or agents, it provides clarity about the scope of their responsibilities and powers within the organization.
Understanding general authority through an example
Imagine a business owner gives the office manager general authority to oversee daily operations, manage staff, and make purchases for office supplies. The office manager can act within the scope of this general authority without needing the owner's approval for each individual purchase or decision. However, if the manager wants to make a significant financial investment or sign a major contract, they may need specific authorization.
In another example, a company’s board of directors delegates general authority to the company’s COO to manage its operational functions. The COO has the discretion to make decisions about hiring, budgeting, and business operations but must report back to the board for strategic decisions or large capital expenditures.
An example of a general authority clause
Here’s how a general authority clause might appear in an agreement:
“The [Title/Position] shall have general authority to manage the day-to-day operations of the Company, including but not limited to, signing contracts, overseeing employee performance, managing finances, and making business decisions in accordance with the Company's policies. Any decision or action outside the scope of this general authority shall require prior approval from the Board of Directors.”
Conclusion
General authority provides the necessary powers for individuals within an organization to manage and oversee routine business operations. It streamlines decision-making and helps businesses function more efficiently. For businesses, it ensures that key personnel can act swiftly when needed, while for employees or agents, it clarifies the scope of their responsibilities and powers. Including a clear general authority provision in agreements ensures both clarity and accountability in business operations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.