Final answer:
The term apparent authority refers to the situation where there is only the appearance of authority, and this appearance is created by the actions or behaviors of the principal.
Step-by-step explanation:
The term apparent authority is used when there is only the appearance of authority and that appearance of authority was created by the principal. This occurs when a third party believes that an agent has the authority to act on behalf of the principal based on the principal's conduct.
Apparent authority is thus distinct from actual authority, where an agent has explicit permission to act. Apparent authority relies on the perceptions created by the principal's representations, not on actual conferred power.
For instance, if a manager at a company allows an employee to negotiate contracts on behalf of the company and does so openly in front of clients, the employee has apparent authority.
The clients would reasonably assume the employee has the authority to bind the company in a contract, even if the employee does not hold an official position to do so or has not been explicitly given that power.
Such authority is a vital concept in business relationships and legal doctrines, as it protects third parties who have been led to believe in the authority of an agent.
It is also a key component in unauthorized actions that bind the principal to certain obligations or contracts. The correct answer to the multiple-choice question would be (a).