What describes apparent authority?

• A. The authority an agent is believed by third parties to have because of the behavior of the principal and agent.
• B. The actual authority defined in the contract.
• C. Authority only granted by explicit written permission.
• D. The authority third parties believe the agent has because of the principal's and agent's behavior.

Answer: (D)

Apparent authority is the authority a third party reasonably believes an agent has because of the principal’s representations or the way both the principal and the agent behave. It isn’t about what is actually granted in a contract; it’s about what a reasonable person would infer from how the principal presents the agent and from the agent’s role and actions. This is why the correct description emphasizes the third party’s belief based on the principal’s and the agent’s conduct.

This differs from actual authority, which is the power the principal actually gives to the agent, either expressly or impliedly in a contract. It isn’t limited to written permission, and it doesn’t depend on the agent’s internal belief—only on what a third party reasonably perceives from outward signs of the principal’s authorization.