Which authority arises when the principal's manifestations to a third party lead the third party to reasonably believe the agent has authority?

Which authority arises when the principal's manifestations to a third party lead the third party to reasonably believe the agent has authority?

• A. Agency
• B. Actual authority
• C. Apparent authority
• D. Estoppel

Answer: (C)

Apparent authority arises when the principal’s outward manifestations to a third party cause the third party to reasonably believe that the agent has authority to act for the principal. The key is the third party’s reasonable reliance on the appearance of authority, not whether the agent actually received a grant of authority. The principal’s representations or conduct—for example, how the agent is presented, what titles are used, or how the agent is allowed to act—create that sense of authority. Because the third party acts in reliance on that appearance, contracts or actions entered by the agent within the scope of that apparent authority bind the principal, even if the agent lacked actual authority. This contrasts with actual authority, which comes from the principal’s direct grant or conduct that authorizes the agent; estoppel can underlie or reinforce apparent authority by preventing the principal from denying the agent’s authority when reliance has occurred.

Apparent authority arises when the principal’s outward manifestations to a third party cause the third party to reasonably believe that the agent has authority to act for the principal. The key is the third party’s reasonable reliance on the appearance of authority, not whether the agent actually received a grant of authority. The principal’s representations or conduct—for example, how the agent is presented, what titles are used, or how the agent is allowed to act—create that sense of authority. Because the third party acts in reliance on that appearance, contracts or actions entered by the agent within the scope of that apparent authority bind the principal, even if the agent lacked actual authority. This contrasts with actual authority, which comes from the principal’s direct grant or conduct that authorizes the agent; estoppel can underlie or reinforce apparent authority by preventing the principal from denying the agent’s authority when reliance has occurred.