What type of authority is based on the agent's actions or words?

Apparent authority arises when a principal's actions or statements lead a third party to reasonably believe that the agent has the authority to act on behalf of the principal. This type of authority does not stem from any explicit agreement or formal delegation of authority but rather from the perception created by the principal's conduct. For instance, if a principal allows an agent to present themselves as an expert or to conduct business in a certain manner, a third party may assume that the agent has the authority to make decisions or enter into contracts in the principal's name.

In this case, the agent’s actions and communication create a situation where the principal is effectively bound by the agent's actions, even if the agent does not actually have the authority to act in that capacity. This principle protects third parties who may be relying on the appearance of authority, thereby ensuring fair dealings in business transactions.

Other types of authority, such as express authority, are clearly defined and agreed upon by both the principal and the agent, whereas implied authority derives from the necessity of carrying out express authority. Conditional authority is not a commonly recognized form of authority in the context of agency relationships. Thus, the usage of "apparent authority" in this context correctly captures the essence of authority based on