Certified Professional Public Buyer (CPPB) Practice Test

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What does "implied authority" refer to in the context of contracts?

Explicit permissions granted by a principal
Authority inferred from the principal's conduct
Formal agreements documented in writing
Delegated responsibilities assigned by management

The correct answer is: Authority inferred from the principal's conduct

Implied authority pertains to powers that are not explicitly stated but are derived from the actions, conduct, or circumstances surrounding a principal's agreement. This type of authority allows an agent to perform acts that are necessary to fulfill their duties, even if those acts are not outlined in a formal contract. In practice, if a principal has established a business relationship with an agent, and the agent engages in actions that suggest they have the authority to act on behalf of the principal, then the law may infer that such authority exists. This is essential in situations where a principal's behavior leads a third party to reasonably believe that an agent has certain powers, thereby binding the principal to the agent's actions. Other choices, while related to authority in contracts, do not align with the concept of implied authority. Explicit permissions refer to clearly stated permissions and are not inferred. Formal agreements focus on written contracts rather than inferred agreements through conduct. Lastly, delegated responsibilities are typically more about assigning duties rather than the implied powers that come from the behavior of the parties involved.