Under apparent authority, which statement is correct?

Under apparent authority, which statement is correct?

• A. The third party's reliance must be reasonable
• B. The reliance is always unreasonable if a partnership is involved
• C. The principal must give actual authority
• D. Apparent authority cannot be proven by actions

Answer: (A)

Under apparent authority, the crucial factor is the third party’s reasonable reliance on the principal’s manifestations that the agent has authority to act. If the principal’s words, conduct, or prior dealings would lead a reasonable person to believe the agent is authorized to bind the principal, the reliance is reasonable and the principal is bound, even if the agent lacks actual authority. The reasonableness is judged objectively, not by the principal’s or agent’s private intent. The existence of actual authority is not required for apparent authority to bind the principal. A partnership situation, or the agent’s status, does not automatically make reliance unreasonable—the principal’s representations can create apparent authority in many contexts. Actions or representations by the principal can establish apparent authority without needing actual authority.

Under apparent authority, the crucial factor is the third party’s reasonable reliance on the principal’s manifestations that the agent has authority to act. If the principal’s words, conduct, or prior dealings would lead a reasonable person to believe the agent is authorized to bind the principal, the reliance is reasonable and the principal is bound, even if the agent lacks actual authority. The reasonableness is judged objectively, not by the principal’s or agent’s private intent. The existence of actual authority is not required for apparent authority to bind the principal. A partnership situation, or the agent’s status, does not automatically make reliance unreasonable—the principal’s representations can create apparent authority in many contexts. Actions or representations by the principal can establish apparent authority without needing actual authority.