Washington Life Producer Practice Exam

When an agent receives authority from the principal in writing, what is this called?

1. Implied authority

2. Express authority

3. Inherent authority

4. Apparent authority

The correct answer is: Express authority

When an agent receives authority from the principal in writing, this is referred to as express authority. Express authority is explicitly granted and defined in the agreement between the principal and the agent, usually through a written document that outlines the scope and limits of the agent's powers. This type of authority leaves no ambiguity regarding the responsibilities and powers of the agent, as everything is laid out in clear terms. In contrast, implied authority exists when the agent is given the ability to perform acts that are reasonably necessary to fulfill their express authority, even if those additional powers are not specifically stated in writing. Inherent authority relates to the powers an agent might possess simply by virtue of their position, while apparent authority refers to the circumstances where a third party reasonably believes the agent has authority, based on the principal's representations. These concepts illustrate different dimensions of authority in an agency relationship, with express authority being the clearest and most formalized.