Which term describes authority that exists when the principal's grant gives the agent power to act on the principal's behalf, and the agent reasonably believes they have such authority?

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

Answer: (A)

This tests actual authority. It exists when the principal has granted the agent power to act on the principal’s behalf, and the agent reasonably believes they have that authority. The grant can be express (clearly stated) or implied (inferred from the principal’s conduct or the duties the agent is expected to perform). The key is the agent’s reasonable belief grounded in the principal’s communications or behavior about what powers were granted.

By contrast, apparent authority depends on a third party’s reasonable belief based on the principal’s representations or conduct toward that third party, not on the agent’s own understanding. Ratification concerns the principal approving an act after it’s been done, thereby retroactively authorizing it. Estoppel involves preventing denial of authority due to reliance by a third party.