Question

Terry and Timmy both work for Alert, a coffee distributor. Terry, who's Timmy's boss, asks Timmy to handle purchasing a shipment of coffee from Colombia. This will require entering into contracts with several coffee farms. Entering into the contracts is an example of:

Answer 1

Answer: Implied authority

Rationale: Terry had given express authority to Timmy to handle purchasing of coffee. However, to handle the purchasing Terry has to enter into a contract and this responsibility is a causality of the express authority. Therefore, Timmy has to enter into the contracts with implied authority which was not explicitly stated by his boss Terry.

Implied authority means authority to act reasonably in a situation after being asked to act on the behalf of the principal even though it was not explicitly stated.