What is the term for the belief that an agent has the authority to bind the principal, even if they do not?

The term for the belief that an agent has the authority to bind the principal, even if they do not, is known as apparent authority. This concept arises from the perception of third parties regarding the agent's authority based on the actions or representations made by the principal. In cases of apparent authority, a third party may reasonably assume that the agent has the power to act on behalf of the principal due to the principal's explicit or implicit representations.

For instance, if a principal allows an agent to engage in certain activities that suggest they have authority, such as presenting themselves in a way that leads others to believe they are authorized, the principal may be held accountable for the agent's actions, even if those actions exceed the actual authority granted. Therefore, apparent authority protects the interests of third parties who rely on the agent's perceived authority to make decisions or enter into agreements. This is crucial for maintaining trust in business transactions and legal interactions.