West Virginia Property and Casualty Licensing Practice Exam

What type of authority does an agent possess to act on behalf of a principal without formal communication?

1. Express authority

2. Implied authority

3. Apparent authority

4. Delegated authority

The correct answer is: Implied authority

An agent possesses implied authority to act on behalf of a principal without formal communication. This type of authority is not specifically granted through written or verbal instruction but is inferred from the actions, conduct, or circumstances surrounding the relationship between the agent and the principal. Implied authority arises when the principal allows the agent to perform actions that are typical or necessary for carrying out the responsibilities of the agency. For instance, if a principal hires an agent to manage a property, the agent may have implied authority to make routine decisions such as collecting rents, managing repairs, and communicating with tenants, even if these specific actions were not explicitly communicated. This understanding is based on the relationship and the nature of the work being done. In contrast, express authority is directly communicated, either verbally or in writing, while apparent authority stems from a principal's representations to third parties that lead them to believe the agent has power to act. Delegated authority refers to the act of transferring authority from one person to another but does not capture the nature of implied actions that are understood by the parties involved without explicit instructions.