What is the standard for the agent's authority to bind the principal to third-party contracts?

• A. The agent must bind the principal regardless of authority.
• B. The agent can bind the principal with any act as long as it benefits the agent.
• C. The agent must act within the scope of authority granted (express, implied, or apparent).
• D. The agent's authority is irrelevant to binding; principals always bound.

Answer: (C)

Authority to bind a principal to third‑party contracts comes from the scope of the agent's authority. The agent can bind the principal only if acting within that scope, which includes express authority (the principal explicitly grants), implied authority (arises from the agency relationship and customary acts in the ordinary course), and apparent authority (the principal's representations lead a third party to reasonably believe the agent has authority). When the agent stays within these bounds, the principal is bound by the contract with the third party. If the agent acts outside the authorized scope, the principal is typically not bound unless they later ratify the act or the third party's reliance is based on the principal's representations that created apparent authority. The other options fail because they ignore or override the necessity of actual or apparent authority, or treat the principal as bound regardless of authority.