Actual Authority: A Comprehensive Guide for Law Students

Question 1

Which of the following is NOT a method of creating actual authority?

Accepted Answer

Apparent authority

Answer

Express consent by the principal

Answer

Implied authority from the business dealings of the principal

Answer

Estoppel by reliance on the principal's representations

Question 2

An agent acting under implied actual authority has:

Accepted Answer

Powers reasonably necessary to perform assigned tasks

Answer

Powers explicitly stated by the principal

Answer

Powers that are specifically prohibited by the principal

Answer

No authority to act on behalf of the principal

Question 3

Estoppel is a principle that can create actual authority when:

Accepted Answer

The principal represents that the agent has authority

Answer

The agent acts beyond the scope of their apparent authority

Answer

The principal ratifies the agent's unauthorized acts

Answer

The agent has express written authority

Question 4

Which of the following is a limitation on actual authority?

Accepted Answer

The agent must act within the scope of their authority

Answer

The agent can act on their own behalf

Answer

The agent's authority can be revoked at any time

Answer

The agent is always liable for the principal's debts

Question 5

Express actual authority is created when:

Accepted Answer

The principal explicitly grants the agent specific powers

Answer

The principal implies that the agent has certain powers

Answer

The agent acts in a way that is consistent with customary practices

Answer

The principal is unaware of the agent's actions

Question 6

An agent's authority to engage in a particular transaction can be inferred from:

Accepted Answer

The agent's previous dealings with the principal

Answer

The agent's knowledge of the industry

Answer

The agent's personal relationship with the third party

Answer

The agent's educational background

Question 7

Which of the following is NOT a consequence of an agent exceeding their actual authority?

Accepted Answer

The agent's authority is automatically terminated

Answer

The principal is not bound by the agent's actions

Answer

The agent may be liable to the third party

Answer

The principal may ratify the agent's actions

Question 8

Ratification occurs when:

Accepted Answer

The principal confirms or approves the agent's unauthorized actions

Answer

The third party agrees to release the agent from liability

Answer

The court finds that the agent acted reasonably

Answer

The principal has no knowledge of the agent's actions

Question 9

Apparent authority is:

Accepted Answer

Authority that a third party reasonably believes the agent has

Answer

Authority that is actually granted by the principal

Answer

Authority that is implied from the agent's position or title

Answer

Authority that is created by estoppel

Question 10

How is express authority typically created?

Accepted Answer

Through written or oral communication from the principal to the agent.

Answer

Through the agent's actions or conduct.

Answer

Through custom and usage in the industry.

Answer

Through ratification by the principal of the agent's unauthorized acts.

Question 11

What is the key element in establishing apparent authority?

Accepted Answer

A third party's reasonable belief that the agent has authority to act.

Answer

The agent's express representation of authority.

Answer

The principal's ratification of the agent's actions.

Answer

The agent's inherent authority.

Question 12

Which of the following factors is not typically considered when determining the scope of implied authority?

Accepted Answer

The agent's personal beliefs.

Answer

The customs and usage of the industry.

Answer

The agent's prior experience and training.

Answer

The principal's express instructions.

Question 13

Can apparent authority arise solely through the agent's representations?

Accepted Answer

Yes, if the third party reasonably relies on the agent's representations and the principal is estopped from denying authority.

Answer

Yes, if the principal subsequently ratifies the agent's actions.

Answer

No, apparent authority can only be created by the principal.

Answer

No, apparent authority can only arise from the agent's conduct.

Question 14

What is a third party's duty of inquiry before relying on apparent authority?

Accepted Answer

To reasonably determine that the agent has the authority to act on behalf of the principal.

Answer

To demand written confirmation of the agent's authority from the principal.

Answer

To conduct a thorough investigation into the agent's credentials and experience.

Answer

To rely on the agent's representations without further inquiry.

Question 15

Which of the following is an example of actual authority, where an agent acts on behalf of their principal?

Accepted Answer

An agent, as per their principal's instructions, signs a contract on their behalf

Answer

An agent purchases a car for their principal, without their principal's knowledge or consent

Answer

An agent represents themselves as authorized to act for their principal, despite lacking authorization

Answer

An agent embezzles funds from their principal's business

Question 16

In which way can actual authority NOT be established?

Accepted Answer

Through apparent authority, as perceived by third parties

Answer

Expressly, through written or oral communication

Answer

Impliedly, through the conduct of the parties

Answer

Through inherent authority, based on the agent's position

Question 17

If an agent has actual authority to enter into a contract on their principal's behalf, who is liable for the contractual obligations?

Accepted Answer

The principal is personally liable for the contract's obligations

Answer

The agent is personally liable for the contract's obligations

Answer

Both the agent and the principal are jointly and severally liable for the contract's obligations

Answer

Neither the agent nor the principal is liable for the contract's obligations

Question 18

When is an agent considered to have apparent authority?

Accepted Answer

When the agent presents themselves as having authority to act on behalf of the principal

Answer

When the principal explicitly grants the agent authority to act on their behalf

Answer

When the agent has implied authority to act on behalf of the principal

Answer

When the principal ratifies the agent's actions

Question 19

When determining an agent's implied actual authority, which factor is NOT considered?

Accepted Answer

The agent's subjective belief in their own authority

Answer

The nature of the agency relationship

Answer

The agent's prior conduct

Answer

The principal's knowledge and acquiescence

Question 20

Which of the following statements about express authority is accurate?

Accepted Answer

It is explicitly stated in writing or orally by the principal

Answer

It can be inferred from the principal's conduct

Answer

It is created by estoppel

Answer

It is always limited in scope

Question 21

Which of the following is NOT a recognized type of actual authority?

Accepted Answer

Inherent authority

Answer

Express authority

Answer

Implied authority

Answer

Apparent authority

Question 22

How is express authority primarily created?

Accepted Answer

Through written or oral communication from the principal

Answer

Through the conduct of the principal

Answer

Through the customs and usage of the industry

Answer

Through the agent's reasonable belief that they have authority

Question 23

When does apparent authority typically arise?

Accepted Answer

Both (a) and (c)

Answer

When the principal manifests to a third party that the agent has authority

Answer

When the agent reasonably believes they have authority

Answer

When the third party reasonably believes the agent has authority

Question 24

Which of the following is not a type of actual authority?

Accepted Answer

Ratification

Answer

Express actual authority

Answer

Implied actual authority

Answer

Apparent actual authority

Question 25

Express actual authority is created when the principal:

Accepted Answer

Expressly authorizes the agent to act on their behalf in writing.

Answer

Verbally authorizes the agent to act on their behalf.

Answer

Impliedly authorizes the agent to act on their behalf.

Answer

Apparent authority.

Question 26

Apparent actual authority is created when:

Accepted Answer

The principal holds the agent out as having authority to third parties.

Answer

The agent falsely represents that they have authority from the principal.

Answer

The principal has expressly authorized the agent to act on their behalf.

Answer

The agent has implied authority to act on behalf of the principal.

Question 27

Inherent actual authority refers to:

Accepted Answer

Authority implied by the nature of the position or duties of the agent.

Answer

Authority expressly granted by the principal in writing.

Answer

Authority apparent from the principal's conduct.

Answer

Authority implied from the agent's past actions.

Question 28

In a case involving actual authority, the burden of proof is on the:

Accepted Answer

Principal to prove the agent's authority

Answer

Agent to prove their own authority

Answer

Third party to prove the agent's authority

Answer

No one, as authority is presumed

Question 29

Which of the following is NOT a source of actual authority, empowering agents to act on behalf of their principals?

Accepted Answer

Inherent authority, possessed by all agents

Answer

Express authority, explicitly granted by the principal

Answer

Implied authority, inferred from the agent's position and duties

Answer

Apparent authority, created by the principal's actions or representations

Question 30

When determining the scope of implied authority, which factor is NOT typically considered?

Accepted Answer

The personal preferences or subjective beliefs of the principal

Answer

The nature of the agency relationship, including the industry and services provided

Answer

The size and complexity of the business organization

Answer

The agent's experience, qualifications, and expertise in the relevant area

Question 31

Which of the following is NOT generally considered a benefit of using agents with actual authority?

Accepted Answer

Reduced liability for the principal as the agent bears the legal consequences of their actions

Answer

Enhanced flexibility in decision-making and responsiveness to changing circumstances

Answer

Increased efficiency and productivity by delegating tasks

Answer

Improved communication and coordination with third parties on behalf of the principal

Question 32

In a situation where both express authority and implied authority have been granted, which type of authority generally takes precedence?

Accepted Answer

Express authority, as it is explicitly stated by the principal

Answer

Implied authority, as it is inferred from the agent's position and responsibilities

Answer

The authority granted first, regardless of its type

Answer

The authority granted later, as it is considered a more recent expression of the principal's intent

Question 33

Under the doctrine of respondeat superior, who may be held liable for an agent's actions committed within the scope of their actual authority?

Accepted Answer

The principal, as they are ultimately responsible for the agent's conduct

Answer

The agent, as they are the ones who directly performed the actions

Answer

Both the principal and the agent, depending on the specific circumstances

Answer

Neither the principal nor the agent, as the doctrine of respondeat superior does not apply to agents

Question 34

How is express authority established?

Accepted Answer

Through direct communication from the principal to the agent

Answer

Through the agent's prior dealings with third parties

Answer

Through the agent's apparent authority

Answer

Through the agent's ratification of the principal's actions

Question 35

Which of the following is an example of apparent authority?

Accepted Answer

An agent who holds themselves out as authorized to act for a principal

Answer

An agent who is given express authority to sell a car

Answer

An agent who is given implied authority to negotiate a contract

Answer

An agent who is given ratified authority to purchase supplies

Question 36

Can ratified authority be used to retroactively bind a principal to an unauthorized act?

Accepted Answer

Yes, in all cases

Answer

Yes, but only if the act was within the agent's apparent authority

Answer

No, ratification cannot be used to bind a principal to an unauthorized act

Answer

Yes, but only if the act was within the agent's express authority

Question 37

What is the primary distinction between express and implied authority?

Accepted Answer

Express authority is directly communicated, while implied authority is inferred from the agent's position or conduct

Answer

Express authority is broader than implied authority

Answer

Implied authority is more difficult to prove than express authority

Answer

Express authority can be created by ratification, while implied authority cannot

Question 38

What are the potential consequences for a principal who fails to adequately supervise their agent?

Accepted Answer

The principal may be liable for the agent's unauthorized acts

Answer

The agent may be liable for the principal's unauthorized acts

Answer

The third party may be liable for the agent's unauthorized acts

Answer

There are no consequences for the principal

Question 39

An agent with express actual authority derives their power to act on behalf of their principal from:

Accepted Answer

Specific instructions or a written grant

Answer

Apparent authority

Answer

Implied consent

Answer

Industry custom and practice

Question 40

In which of the following circumstances is it most likely that an agent would have implied actual authority?

Accepted Answer

Performing tasks that are typically performed by agents in their industry

Answer

Representing the principal in negotiations

Answer

Acting outside the scope of their express authority

Question 41

A key difference between actual and apparent authority is that:

Accepted Answer

Actual authority is created by the principal's intent, while apparent authority is created by the principal's actions or representations.

Answer

Actual authority is broader than apparent authority

Answer

Apparent authority is more common than actual authority

Question 42

In a situation where both actual and apparent authority exist,:

Accepted Answer

The principal is bound by the agent's acts within either scope of authority

Answer

Only the actual authority is valid

Answer

Only the apparent authority is valid

Question 43

Which of the following is NOT a way to prevent apparent authority from arising?

Accepted Answer

Using job titles that imply authority

Answer

Monitoring agents' activities

Answer

Providing clear instructions to agents

Answer

Informing third parties of an agent's limitations

Question 44

A principal instructs her agent to purchase a specific piece of equipment for their business. The agent, however, purchases a different piece of equipment, believing it to be more efficient and cost-effective.  Which of the following statements is most accurate regarding the agent's actions?

Accepted Answer

The agent may have acted outside their actual authority, as they did not follow the principal's explicit instructions.

Answer

The agent's actions are irrelevant, as the principal is bound by the contract regardless of the agent's authority.

Answer

The agent likely acted within their actual authority, as the agent's actions were ultimately beneficial.

Answer

The agent's actions are justifiable if the principal ratifies the purchase after the fact.

Question 45

A company's CEO delegates authority to the marketing manager to negotiate and finalize advertising contracts. The marketing manager enters into a long-term contract that requires board approval, which was not obtained.  Which of the following statements is most accurate regarding the marketing manager's actions?

Accepted Answer

The marketing manager acted outside their actual authority, as the contract exceeded the scope of their delegated authority.

Answer

The marketing manager's actions are valid if the CEO ratifies the contract after the fact.

Answer

The marketing manager acted within their actual authority, as they were delegated authority to negotiate contracts.

Answer

The marketing manager's actions are irrelevant, as the company is bound by the contract regardless of the agent's authority.

Question 46

A business owner instructs their employee to purchase office supplies. The employee purchases a new laptop computer without explicit authorization.  Which of the following statements is most accurate regarding the employee's actions?

Accepted Answer

The employee likely acted outside their actual authority, as purchasing a laptop computer is not typically considered within the scope of purchasing office supplies.

Answer

The employee's actions are valid if the business owner ratifies the purchase after the fact.

Answer

The employee's actions are irrelevant, as the business owner is bound by the purchase regardless of the employee's authority.

Answer

The employee acted within their actual authority, as the principal gave them authority to purchase office supplies.

Question 47

A company's sales manager is granted authority to negotiate and close sales deals. The sales manager enters into a contract with a new client that requires the company to provide services beyond its normal scope.  Which of the following statements is most accurate regarding the sales manager's actions?

Accepted Answer

The sales manager likely acted outside their actual authority, as the contract involved services beyond the company's normal scope.

Answer

The sales manager acted within their actual authority, as they were delegated authority to close sales deals.

Answer

The sales manager's actions are irrelevant, as the company is bound by the contract regardless of the agent's authority.

Answer

The sales manager's actions are valid if the CEO ratifies the contract after the fact.

Question 48

A property manager is instructed by the owner to rent out an apartment for a minimum monthly rent of $1,500. The property manager rents the apartment for $1,400 per month, believing it to be a fair market value.  Which of the following statements is most accurate regarding the property manager's actions?

Accepted Answer

The property manager acted outside their actual authority, as they did not meet the minimum rent requirement set by the owner.

Answer

The property manager acted within their actual authority, as they were acting in the best interests of the owner.

Answer

The property manager's actions are valid if the owner ratifies the lease agreement after the fact.

Answer

The property manager's actions are irrelevant, as the owner is bound by the lease agreement regardless of the agent's authority.

Question 49

A company's human resources manager is authorized to hire new employees. The human resources manager enters into a contract with a temporary staffing agency without explicit authorization from the company's management.  Which of the following statements is most accurate regarding the human resources manager's actions?

Accepted Answer

The human resources manager likely acted outside their actual authority, as contracting with a temporary staffing agency was not explicitly authorized.

Answer

The human resources manager's actions are irrelevant, as the company is bound by the contract regardless of the agent's authority.

Answer

The human resources manager acted within their actual authority, as they were authorized to hire new employees.

Answer

The human resources manager's actions are valid if the company management ratifies the contract after the fact.

Question 50

A principal instructs their agent to negotiate a contract with a specific supplier. The agent negotiates a contract with a different supplier, believing it to be more reliable and cost-effective.  Which of the following statements is most accurate regarding the agent's actions?

Accepted Answer

The agent may have acted outside their actual authority, as they did not follow the principal's explicit instructions.

Answer

The agent likely acted within their actual authority, as the agent's actions were ultimately beneficial.

Answer

The agent's actions are only valid if the principal ratifies the contract after the fact.

Answer

The agent's actions are irrelevant, as the principal is bound by the contract regardless of the agent's authority.

Question 51

A marketing manager is authorized to approve advertising campaigns. The marketing manager enters into a contract with a new advertising agency without the company's CEO's approval. Which of the following statements is most accurate regarding the marketing manager's actions?

Accepted Answer

The marketing manager likely acted outside their actual authority, as entering into a contract with a new agency was not explicitly authorized.

Answer

The marketing manager's actions are valid if the CEO ratifies the contract after the fact.

Answer

The marketing manager acted within their actual authority, as they were authorized to approve advertising campaigns.

Answer

The marketing manager's actions are irrelevant, as the company is bound by the contract regardless of the agent's authority.