Apparent authority is a fundamental legal concept in agency law. It occurs when a third party reasonably believes that an agent has the authority to act on behalf of a principal, even though no actual authority exists between the principal and agent. This creates a legal relationship based on the appearance of authority rather than actual authorization.
For apparent authority to be established, three essential elements must be present. First, there must be a manifestation by the principal that creates the appearance of authority. Second, the third party must have a reasonable belief in the agent's authority based on this manifestation. Third, the third party must rely on this belief when dealing with the agent. All three elements are necessary for apparent authority to exist.
Let's examine a practical example of apparent authority. A company CEO provides an employee with a company car and business cards for client meetings. When a supplier sees the employee using these company resources, they reasonably believe the employee has authority to make purchases on behalf of the company. Even if the CEO never explicitly gave purchasing authority, apparent authority may exist based on the manifestations provided.