Apparent Authority: A Comprehensive Guide for Juris Doctor Students

Question 1

Which of the following is a legal consequence of apparent authority for principals?

Accepted Answer

Liability for acts of the agent even if not authorized

Answer

Termination of the agency relationship

Answer

No legal consequences

Question 2

When is apparent authority NOT likely to be found?

Accepted Answer

When the third party knows the agent lacks actual authority

Answer

When the principal publicly proclaimed the agent as having authority

Answer

When the agent acted in the ordinary course of business

Answer

When the third party relied on the agent's apparent authority

Question 3

Which of the following is NOT a factor considered when evaluating a third party's reasonableness in believing an agent has apparent authority?

Accepted Answer

The third party's own due diligence

Answer

The industry customs and practices

Answer

The agent's position or title

Answer

The principal's conduct and representations

Question 4

In which scenario is it most likely that a court would find apparent authority?

Accepted Answer

When the agent has consistently acted on the principal's behalf

Answer

When the third party has a written contract with the agent

Answer

When the third party failed to inquire about the agent's authority

Answer

When the agent explicitly stated they lacked authority

Question 5

Which of the following accurately describes the relationship between apparent and actual authority?

Accepted Answer

Apparent authority can be broader or narrower than actual authority

Answer

Apparent authority is always more extensive than actual authority

Answer

Apparent authority is always equal to actual authority

Answer

Apparent authority is only relevant when actual authority is lacking

Question 6

What is the legal basis for holding a principal liable for the acts of an agent with apparent authority?

Accepted Answer

Estoppel

Answer

Implied contract

Answer

Agency by ratification

Answer

Statutory obligation

Question 7

What is the primary purpose of the doctrine of apparent authority?

Accepted Answer

To protect third parties from dealing with unauthorized agents

Answer

To prevent principals from being liable for the acts of their agents

Answer

To encourage fraud and misrepresentation in commercial transactions

Answer

To make it more difficult for businesses to operate efficiently

Question 8

Which element is NOT required to establish apparent authority?

Accepted Answer

Third party's knowledge of the agent's actual authority

Answer

Principal's conduct leading to the third party's belief in the agent's authority

Answer

Third party's reliance on the agent's apparent authority

Question 9

What is the primary difference between apparent authority and implied authority?

Accepted Answer

Apparent authority stems from the principal's actions, while implied authority arises from the agent's position.

Answer

Implied authority encompasses a broader scope than apparent authority.

Answer

Apparent authority can only be established by the principal, whereas implied authority can be established by both the principal and the agent.

Question 10

Which of the following is a fundamental assumption underlying the doctrine of apparent authority?

Accepted Answer

The third party's belief in the agent's authority must be objectively reasonable.

Answer

The third party must have actual knowledge of the agent's limited authority.

Answer

The principal must have expressly represented the agent as having authority.

Answer

The agent must have acted within the scope of their actual authority.

Question 11

Which of the following is NOT an element of apparent authority?

Accepted Answer

Actual authority granted by the principal

Answer

Reasonable belief of the third party

Answer

Words or conduct of the principal

Answer

Reliance on the apparent authority by the third party

Question 12

In which of the following situations is apparent authority most likely to arise?

Accepted Answer

When the agent is acting within the scope of their ordinary duties

Answer

When the agent is acting in a new or unfamiliar role

Answer

When the agent is acting without the principal's knowledge or consent

Question 13

Which of the following is a potential limitation of the doctrine of apparent authority?

Accepted Answer

It can expose principals to liability for unauthorized acts of their agents

Answer

It encourages agents to act responsibly and within the scope of their authority

Answer

It promotes certainty and predictability in commercial transactions

Question 14

In the context of apparent authority, which of the following statements is true?

Accepted Answer

The doctrine aims to balance the rights and interests of both principals and third parties

Answer

The principal can never be liable for the acts of an agent who lacks actual authority

Answer

Apparent authority is always created by express representation

Question 15

Which of the following is NOT an element required for apparent authority to arise?

Accepted Answer

The agent was expressly authorized by the principal to engage in the transaction.

Answer

The third party reasonably believed the agent had authority to act on behalf of the principal.

Answer

The agent acted within the scope of the apparent authority.

Question 16

Which of the following is an example of apparent authority arising from estoppel?

Accepted Answer

A homeowner repeatedly allows a landscaper to enter their property without objection, giving the landscaper the appearance of having the homeowner's authority to make landscaping decisions.

Answer

A salesperson makes a contract on behalf of a company they are not employed by.

Answer

A lawyer signs a contract on behalf of a client without the client's explicit authorization.

Question 17

Which of the following is a factor that courts consider when determining whether apparent authority exists?

Accepted Answer

The industry customs and practices.

Answer

The agent's social status.

Answer

The third party's age.

Answer

The principal's physical appearance.

Question 18

Which of the following is NOT a way to avoid liability for the acts of an agent with apparent authority?

Accepted Answer

Educating the public about the agent's actual authority.

Answer

Terminating the agent's authority.

Answer

Disclosing the agent's lack of actual authority to the third party.

Question 19

Which of the following is NOT an element of apparent authority?

Accepted Answer

Actual authority granted by the principal

Answer

Reliance by the third party on the apparent authority

Answer

Belief by the third party that the agent has authority to act on behalf of the principal

Answer

Words or conduct of the principal that create a reasonable belief of authority

Question 20

Under which circumstance is a principal bound by an apparent agent's actions?

Accepted Answer

When the principal's conduct or words led the third party to reasonably believe the agent had authority

Answer

Only when the principal expressly grants the agent authority

Answer

Never, unless the agent actually had authority

Question 21

How does apparent authority differ from implied authority?

Accepted Answer

Apparent authority arises from a third party's reasonable belief based on the principal's conduct, while implied authority is based on the principal's intent or the agent's position

Answer

Implied authority is broader than apparent authority

Question 22

What are the potential consequences of a principal failing to oversee an agent with apparent authority?

Accepted Answer

The principal may be liable for the agent's actions that were reasonably perceived as authorized, even if the agent exceeded their actual authority

Answer

Termination of the agency relationship

Answer

Criminal prosecution of the principal

Question 23

Can apparent authority be used to create a partnership?

Accepted Answer

Yes, if the third party reasonably believes that the agent had authority to bind an alleged partner and enters into a contract in reliance on that belief

Answer

No, apparent authority can only be used to create an agency relationship

Answer

Only if the alleged partner ratifies the agent's actions

Question 24

In which of the following situations would apparent authority NOT be applicable?

Accepted Answer

When a third party deals directly with the principal, knowing that the agent has no authority to act on the principal's behalf

Answer

When an agent exceeds the scope of their actual authority

Answer

When an agent is acting in the usual course of business for the principal

Question 25

Which of the following is NOT an essential element of apparent authority?

Accepted Answer

The agent's actual authority

Answer

The third party's reasonable belief in the agent's authority

Answer

The principal's manifestation of consent

Answer

The agent's conduct

Question 26

Which of the following is a potential risk for third parties dealing with agents under apparent authority?

Accepted Answer

Liability for losses incurred due to reliance on the agent's authority.

Answer

Gaining a windfall profit from the agent's acts.

Answer

Being excused from performing their own obligations.

Question 27

The doctrine of apparent authority shares the closest conceptual alignment with which of the following legal principles?

Accepted Answer

Estoppel

Answer

Breach of warranty

Answer

Implied contract

Answer

Agency by ratification

Question 28

Which of the following is NOT a required element for establishing apparent authority?

Accepted Answer

Actual authority granted by the principal

Answer

The principal's words or actions indicated the agent had authority.

Answer

The principal's conduct led the third party to reasonably believe the agent had authority.

Answer

The third party reasonably believed the agent had authority based on the principal's actions.

Question 29

In the context of apparent authority, who is primarily liable to the third party?

Accepted Answer

The principal

Answer

Neither the principal nor the agent

Answer

Both the principal and the agent

Answer

The agent

Question 30

Which of the following situations would most likely give rise to apparent authority?

Accepted Answer

The principal holds the agent out to the public as having authority to act on the principal's behalf.

Answer

The agent has no actual authority to act for the principal.

Question 31

A principal, Acme Corp., has a contract with a supplier, Beta Inc., which states that all purchase orders must be signed by the VP of Operations. However, Acme's Sales Manager, Sarah, has been placing orders with Beta without this authorization for months. Beta is unaware of this limitation. When Acme refuses to pay for a recent order placed by Sarah, Beta sues Acme for breach of contract.  What is the most likely outcome of this lawsuit?

Accepted Answer

Beta will likely win because Acme gave the appearance that Sarah had authority to place orders.

Answer

Acme will likely win because Sarah lacked actual authority to place orders.

Answer

Acme will likely win because Beta should have known that Sarah's authority was limited.

Question 32

Which of the following is NOT a requirement for establishing apparent authority?

Accepted Answer

The agent must have actually acted within the scope of their actual authority.

Answer

The principal must have made representations that the agent had authority.

Answer

The third party must have reasonably relied on the principal's representations.

Question 33

A principal, Gamma Corp., hires an agent, David, to negotiate a contract with a potential client. Gamma instructs David to only negotiate a contract that includes a specific non-compete clause.  David negotiates a contract that omits this clause, but the client believes David has authority to make this change. Which statement is TRUE?

Accepted Answer

Gamma is likely bound by the contract because David had apparent authority to negotiate the contract.

Answer

Gamma is not bound by the contract because David acted outside the scope of his actual authority.

Question 34

A principal, Delta Co., assigns its agent, Emily, to manage a specific project. Emily consistently signs contracts in Delta Co.'s name without express authorization but Delta Co. never objects. Later, Emily signs a contract that exceeds the project's scope. Is Delta Co. bound by the contract?

Accepted Answer

Yes, Delta Co. is likely bound because it acquiesced to Emily's actions, creating apparent authority.

Answer

No, Delta Co. is not bound because Emily acted outside the scope of her actual authority.

Question 35

A principal, Epsilon Inc., hires an agent, Frank, to sell products to retailers.  Epsilon tells retailers that Frank has full authority to negotiate prices and payment terms.  However, Frank secretly negotiates deals with retailers at prices below Epsilon's cost. Epsilon discovers this and sues retailers for the difference in price.  What is Epsilon's likely outcome?

Accepted Answer

Epsilon will likely lose because it created the appearance that Frank had full authority to negotiate prices.

Answer

Epsilon will likely win because Frank acted outside the scope of his actual authority.

Question 36

A principal, Zeta Inc., appoints an agent, Grace, to handle its marketing campaigns. Zeta explicitly instructs Grace not to engage in any advertising on social media platforms. Grace, however, runs a successful social media campaign for Zeta without authorization. Zeta is pleased with the results and benefits from increased sales. Can Zeta later claim that Grace had no authority to launch the campaign?

Accepted Answer

No, Zeta likely cannot claim lack of authority because it ratified Grace's actions by accepting the benefits.

Answer

Yes, Zeta can claim lack of authority because Grace acted outside her explicit instructions.

Question 37

A principal, Iota Corp., hires an agent, Irene, to handle customer service inquiries.  Iota places a notice on its website stating that all customer complaints must be directed to the customer service department.  However, Irene routinely addresses customer complaints directly and resolves disputes.  One customer, after resolving their complaint with Irene, files a lawsuit against Iota for breach of contract.  What is the most likely outcome?

Accepted Answer

Iota is likely bound by Irene's actions because it created the appearance that Irene had authority to address customer complaints.

Answer

Iota is not bound because Irene acted outside the scope of her actual authority.

Question 38

Kappa Corp. hires John to manage its property. Kappa explicitly forbids John from making major renovations without prior approval. John, without authorization, hires a contractor to renovate the property. The contractor believes John has the authority to make such decisions. Is Kappa bound by the renovation contract?

Accepted Answer

Yes, Kappa is likely bound if the contractor reasonably believed John had the authority to make renovations.

Answer

Kappa is only bound if the contractor can prove John had actual authority.

Answer

No, Kappa is not bound because John acted outside his actual authority.

Question 39

Which of the following is NOT a requirement for establishing apparent authority?

Accepted Answer

Actual authority granted by the principal

Answer

The third party relied on the agent's apparent authority.

Answer

The principal's words or conduct indicated the agent had authority.

Answer

The third party reasonably believed the agent had authority.

Question 40

In which of the following scenarios would apparent authority most likely be found?

Accepted Answer

The principal represents to a third party that the agent has authority to act on their behalf.

Answer

The agent's actions are inconsistent with the principal's typical business practices.

Answer

The agent has acted on behalf of the principal in the past.

Answer

The third party is aware the agent lacks actual authority.

Question 41

What is a direct consequence of apparent authority?

Accepted Answer

The principal is bound by the actions of the agent.

Answer

The agent is personally liable for any unauthorized actions.

Answer

The third party has no legal recourse against the principal.

Answer

The agent's authority is automatically revoked.

Question 42

A principal tells his agent, Sarah, she has no authority to enter into contracts on his behalf. However, he allows Sarah to use his company letterhead and business cards. A third party, unaware of the limitation, contracts with Sarah believing she is authorized. Is the principal bound by the contract?

Accepted Answer

Yes, the principal is likely bound by the contract due to apparent authority.

Answer

No, the principal is not bound because the third party should have verified Sarah's authority.

Answer

No, the principal is not bound because he explicitly instructed Sarah not to enter into contracts.

Question 43

Which of the following is NOT a requirement for establishing apparent authority?

Accepted Answer

The agent must have actual authority.

Answer

The third party must have reasonably relied on the agent's apparent authority.

Answer

The third party must have suffered a detriment due to relying on the agent's apparent authority.

Answer

The principal must have held the agent out as having authority.

Question 44

A real estate agent, working for a seller, shows a property to a potential buyer. The agent tells the buyer the property is zoned for commercial use, but this is incorrect. The buyer relies on this and purchases the property, only to find out later it's not zoned commercially. Which of the following is true?

Accepted Answer

The seller may be liable to the buyer for the agent's misrepresentation, even if the agent was not authorized to make such a statement.

Answer

The seller is not liable because the agent was not authorized to provide zoning information.

Answer

The buyer should have verified the zoning information independently.

Question 45

A company's receptionist routinely accepts orders for goods. The company's president has never explicitly authorized the receptionist to accept orders, but has never stopped her from doing so either. A customer places an order with the receptionist, believing she is authorized. Is the company bound by the order?

Accepted Answer

Yes, the company is likely bound because the receptionist's actions created apparent authority.

Answer

No, the company is not bound because the receptionist had no express authority.

Answer

No, the company is not bound because the customer should have verified the receptionist's authority.

Question 46

A principal terminates an agent's authority to act on his behalf. However, the agent continues to represent himself as the principal's agent and enters into a contract with a third party. Is the principal bound by the contract?

Accepted Answer

No, the principal is likely not bound because the agent's authority was terminated.

Answer

Yes, the principal is bound because the agent had apparent authority.

Answer

Yes, the principal is bound because the third party was unaware of the termination.

Question 47

Which of the following is an example of a circumstance that would NOT create apparent authority?

Accepted Answer

An agent signing a contract with his own name, but identifying himself as an agent for the principal.

Answer

A principal providing his agent with a business card that identifies the agent as an authorized representative.

Question 48

A principal wants to limit the apparent authority of his agent. Which of the following actions is LEAST likely to be effective?

Accepted Answer

Giving the agent a written memo instructing him not to enter into certain types of contracts.

Answer

Publicly announcing the agent's limited authority.

Answer

Refusing to ratify contracts entered into by the agent that exceed his authority.

Question 49

A principal authorizes his agent to sell a car for $10,000. The agent, without authorization, sells the car for $8,000. The buyer is unaware of the agent's lack of authority and believes the agent was authorized to sell the car at that price. Is the principal bound by the sale?

Accepted Answer

Yes, the principal is likely bound by the sale due to apparent authority, but the principal may have a claim against the agent for breach of duty.

Answer

No, the principal is not bound because the agent exceeded his authority.

Question 50

A principal hires a marketing consultant to represent him at a trade show. The consultant, without authorization, signs a contract with a potential client on the principal's behalf. The contract is for a service the principal does not offer. Is the principal bound by the contract?

Accepted Answer

No, the principal is likely not bound because the consultant's actions were outside the scope of his apparent authority.

Answer

Yes, the principal is bound because the consultant was acting on his behalf.

Question 51

A company's sales manager routinely approves customer credit applications. The company's CEO has never told the sales manager he has authority to approve credit applications, but he has never stopped him from doing so either. A customer submits a credit application that is approved by the sales manager. Is the company bound by the approval?

Accepted Answer

Yes, the company is likely bound by the sales manager's approval due to apparent authority.

Answer

No, the company is not bound because the customer should have verified the sales manager's authority.

Answer

No, the company is not bound because the sales manager had no express authority.