Which statement best describes apparent authority in agency?

• A. Apparent authority is never sufficient to bind the principal.
• B. The agent binds the principal only if there is actual authority.
• C. Apparent authority arises when the principal's representations lead a third party to reasonably believe the agent has authority.
• D. Apparent authority requires written documentation to be valid.

Answer: (C)

Apparent authority occurs when the principal’s representations or conduct lead a reasonable third party to believe the agent has authority to act on the principal’s behalf. The crucial element is the third party’s reliance on the principal’s manifestations, not any actual power the agent genuinely possesses. If the principal allowed the agent to present themselves as having authority, or failed to correct a misimpression after awareness, the principal can be bound by the agent’s acts within the scope of that appearance of authority.

So, the best description is that apparent authority arises from the principal’s representations that a third party reasonably believes the agent has authority. This binding effect can occur even without any actual authority, and it does not require written documentation.