Ohio Land Title Association – Title Agent Practice Exam

The correct choice, which indicates the type of authority that assumes an agent has whatever authority a reasonable person would assume, is known as apparent authority. Apparent authority arises when a principal's actions or representations lead a third party to reasonably believe that the agent has the authority to act on behalf of the principal, even if that authority has not been formally granted.

For instance, if a business owner frequently allows an employee to negotiate contracts and the business owner creates an environment where customers believe that this employee has the authority to make such decisions, the employee may be deemed to have apparent authority. This protects the third parties who rely on the agent’s authority based on the principal's conduct.

Implied authority refers to the authority an agent has that is not explicitly stated but is necessary to carry out their duties. Express authority is the authority given explicitly through either verbal or written communication. Limited authority restricts the extent of an agent's power, therefore not fitting the context of what a reasonable person would assume.