Which scenario best illustrates apparent authority?

• A. A principal explicitly authorizes an agent in writing.
• B. The principal's representations to a third party reasonably lead the third party to believe the agent has authority, even if the agent has no actual authority.
• C. The contract is void if there is no actual authority.
• D. The agent acts with express authority but exceeds it.

Answer: (B)

Apparent authority happens when the principal’s representations or conduct lead a third party to reasonably believe the agent has authority to act for the principal, even though the agent lacks actual authority. In this scenario, the principal’s representations to a third party create just that reasonable belief. Because the third party relies on what the principal communicated, the principal can be bound by the agent’s actions within that apparent authority, despite there being no actual authority.

Explicit authorization in writing is actual authority, not apparent. A contract isn’t automatically void for lack of actual authority if the third party reasonably believed the agent had authority due to the principal’s representations. And an agent who acts beyond express authority is a breach of the authority structure, not a pure illustration of apparent authority.