Question

Explain the concept of apparent authority.

Answer 1

Apparent authority is the situation where a third party reasonably believes that the agent has authority to act on behalf of the principal. It is different from actual authority.

For instance a principal may have specifically asked his agent not to sign a contract. However if the third party believes that the agent had the authority to do so any contract signed by him will be bound upon the principal. Thus apparent authority is based upon the  reasonable belief of the outside party about the agent's authority to take the action on behalf of the principal.