Which type of authority is NOT defined in an agent's contract but is crucial for conducting business?

Implied authority is the type of authority that is not explicitly defined in an agent's written contract but is still essential for the agent to conduct business effectively. This authority allows an agent to perform acts that are necessary to fulfill their responsibilities and achieve the objectives of the agency, even if those acts are not specifically outlined in the contract.

In practice, implied authority arises from the nature of the agent’s duties and the relationship with the principal. It is based on the assumption that certain actions are required to facilitate the completion of the tasks assigned to the agent. For example, if an agent is given the authority to sell insurance policies, they likely have implied authority to handle necessary administrative tasks related to that sale, such as collecting premiums or providing policyholders with documentation.

Understanding implied authority is crucial because it helps to ensure that agents can operate effectively and respond to situations as they arise in their daily business dealings. This allows for efficiency and adaptability within the scope of the agency's objectives, even when those specifics aren't laid out in the contract.