When can an agent exercise apparent authority?

Apparent authority allows an agent to act on behalf of a principal when a third party reasonably believes that the agent has the authority to do so, based on the principal's representations. This doctrine is rooted in the principle of estoppel, which protects the reasonable expectations of third parties who rely on the actions or words of the principal. If a principal communicates to the outside world – whether directly or indirectly – that an agent has specific authority, then that agent can bind the principal to contracts or agreements as perceived by a reasonable third party.

For instance, if a principal allows an agent to operate in a specific capacity, and the principal has not clearly defined or restricted that role, the third party may rightfully conclude that the agent can act in a way typically associated with such a position. This is particularly vital in business contexts where the clear delineation of roles and responsibilities may not always be communicated effectively.

Other options do not accurately convey the concept of apparent authority. Explicit authorization by the principal would refer to actual authority, not apparent authority. Acting independently without the principal's consent does not meet the necessary conditions for apparent authority, as it requires a connection to the principal's representations. Similarly, reliance on historical granting of authority lacks the immediacy and recognition