Which statement correctly describes express and implied warranties of authority?

Which statement correctly describes express and implied warranties of authority?

• A. Express warranty asserts the agent has no authority; implied warranty arises from the agent's relationship to the principal.
• B. Express warranty states the agent has authority only in writing; implied warranty requires no documentation.
• C. Express warranty asserts the agent has authority; implied warranty arises from the agent's relationship to the principal; exceeding authority may not bind the principal or may bind in some circumstances.
• D. Express warranty and implied warranty are the same concept.

Answer: (C)

Express authority and implied authority govern when an agent can bind the principal to a contract. Express authority is a clear grant by the principal that the agent may act on the principal’s behalf, so when the agent acts within that grant, there is a warranty to the third party that the agent indeed has authority. Implied authority arises from the agent’s relationship to the principal and the ordinary needs of the agency; it allows the agent to do things necessary or incidental to carry out the agency’s purpose, even if not expressly stated. If the agent goes beyond what has been granted, the principal is not automatically bound to those unauthorized acts. There are important exceptions: if the principal’s conduct or representations lead a third party to believe the agent had authority (apparent authority), or if the principal later ratifies the unauthorized act, then the principal can be bound. So, the statement that express authority asserts the agent has authority, implied authority arises from the agent’s relationship to the principal, and exceeding authority may not bind the principal or may bind in some circumstances correctly captures how these warranties function.

Express authority and implied authority govern when an agent can bind the principal to a contract. Express authority is a clear grant by the principal that the agent may act on the principal’s behalf, so when the agent acts within that grant, there is a warranty to the third party that the agent indeed has authority. Implied authority arises from the agent’s relationship to the principal and the ordinary needs of the agency; it allows the agent to do things necessary or incidental to carry out the agency’s purpose, even if not expressly stated.

If the agent goes beyond what has been granted, the principal is not automatically bound to those unauthorized acts. There are important exceptions: if the principal’s conduct or representations lead a third party to believe the agent had authority (apparent authority), or if the principal later ratifies the unauthorized act, then the principal can be bound.

So, the statement that express authority asserts the agent has authority, implied authority arises from the agent’s relationship to the principal, and exceeding authority may not bind the principal or may bind in some circumstances correctly captures how these warranties function.