Define "apparent authority" within the context of agency.

Apparent authority refers to a situation where a principal's actions or representations lead a third party to reasonably believe that an agent has authority to act on the principal's behalf, even if the agent does not actually possess that authority. In this context, it is the perception held by third parties, who operate under the assumption that the agent is authorized to undertake certain actions based on the principal's conduct.

This concept is vital in agency law as it protects third parties dealing with agents. If a principal has inadvertently created an impression that the agent has certain powers, the principal may still be held accountable for the agent's actions taken within that perceived authority. This mechanism ensures fairness in dealings and fosters trust in agency relationships.

In contrast, authority granted by a written contract pertains to formal agreements and is not relevant to the perceptions of third parties. Authority specified in the agency agreement directly correlates to the actual powers conveyed from principal to agent, which may differ from what third parties perceive. Lastly, while prior existing relationships may inform perceptions of authority, they do not directly encapsulate the essence of apparent authority as it focuses on the third-party belief rather than the nature of past interactions.