Implied Authority and Third Party:

Implied authority refers to the authority that is not expressly granted to an agent but is necessary to carry out his/her duties or responsibilities. It is based on the conduct of the principal and the agent, and the circumstances surrounding their relationship. A third party dealing with an agent may rely on the agent's apparent authority or implied authority to enter into a transaction on behalf of the principal.

Effect of Limitation of Implied Authority on Third Party:

When an agent exceeds his/her implied authority, the principal may not be bound by the transaction unless he/she ratifies it. However, the limitation of implied authority does not affect a third party unless he/she has actual notice of it.

Explanation:

The principle of law underlying this concept is that a third party dealing with an agent should not be penalized for the principal's failure to communicate the limitation of the agent's authority. Thus, if a third party has no knowledge of the limitations of the agent's authority, he/she may assume that the agent has the necessary authority to act on behalf of the principal.

For example, if a company's sales representative has the implied authority to sell products up to a certain limit but exceeds that limit in a transaction without the knowledge of the buyer, the buyer may assume that the representative has the necessary authority to enter into the transaction. Thus, the limitation of implied authority will not affect the buyer's rights in the transaction unless he/she had actual notice of the limitation.

Conclusion:

In conclusion, the limitation of implied authority does not affect a third party unless he/she has actual notice of it. This principle protects the interests of third parties who rely on the apparent or implied authority of an agent to enter into a transaction with a principal.