Which authority arises from the principal's manifestation to the agent that leads the agent to reasonably believe they have authority?

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

Answer: (C)

Actual authority is created when the principal communicates to the agent that the agent may act on the principal’s behalf, and that communication leads the agent to reasonably believe they have authority. This includes express statements or conduct by the principal that persuades the agent that they may bind the principal in transactions. The key is the agent’s reasonable belief based on the principal’s manifestation to the agent themselves.

This differs from apparent authority, which comes from the principal’s outward representations to a third party—what a third party reasonably believes about the agent’s authority based on the principal’s behavior toward others, not the agent. Ratification is different too: it happens when the principal retroactively approves a contract after the agent acts without authority. Estoppel relates to preventing a principal from denying authority to a third party because of detrimental misrepresentations or holding out, not to the agent’s own reasonable belief of authority.