Certified Professional Public Buyer (CPPB) Practice Test

Which type of authority is typically understood by third parties even if not formally recorded?

1. Delegated authority

2. Apparent authority

3. Express authority

4. Implied authority

The correct answer is: Apparent authority

Apparent authority is a concept that refers to the authority that a third party reasonably believes an individual possesses based on the actions or representations made by someone in a position of authority. This type of authority does not need formal recording to be understood by third parties because it is established through the behavior or communications of the agent or the principal. For example, if a company allows an employee to regularly transact business on its behalf, third parties may assume that the employee has the authority to bind the company in contracts, even if there is no formal documentation to that effect. Apparent authority arises from the perceptions created in the minds of outsiders; thus, it plays a key role in business dealings and negotiations where formal delegations may not be explicitly detailed or recorded. In contrast, express authority is clear and direct permission granted through written or spoken words. Implied authority refers to actions and duties that are not explicitly stated but are necessary to fulfill an express authority. Delegated authority involves formally assigning specific powers or responsibilities to another party. These definitions highlight why they do not match the context of how authority is understood by third parties in an informal setting.