South Dakota Crop Insurance Practice Exam

What term describes the authority an agent has based on the principal's explicit instructions?

1. General authority

2. Implied authority

3. Express authority

4. Contingent authority

The correct answer is: Express authority

The correct term is express authority, which refers to the explicit powers granted to an agent by the principal. This type of authority is defined clearly through direct communication, such as written agreements or verbal instructions where the principal outlines the specific actions that the agent is permitted to undertake on their behalf. In the context of crop insurance, express authority allows agents to perform designated tasks like submitting claims or signing documents as per the instructions from the insurance company or farmer. This clear understanding helps to ensure that the agent acts in accordance with the principal’s wishes, establishing a defined scope of action. Other forms of authority, such as general authority or implied authority, do not hinge on explicit instructions. General authority refers to broader powers that an agent typically might have in their role, while implied authority arises from the agent's actions and the reasonable beliefs of others regarding what the agent can do, without explicit directives. Contingent authority is not commonly used to describe agency relationships in this context and is not the right term for describing authority based solely on specific instructions from a principal.