What type of authority is established through the agent's contract?

The authority established through an agent's contract is referred to as express authority. This type of authority is explicitly granted to the agent through the terms of the contract or agreement made between the agent and the principal (for example, the insurance company). The contract clearly outlines the specific powers and responsibilities that the agent possesses, allowing them to act on behalf of the principal in designated matters, such as selling insurance policies or negotiating terms.

Express authority is significant because it creates a clear legal framework that both the agent and the principal can rely on. It ensures that the agent's actions are legitimate and within the scope of what has been agreed upon, providing confidence to both the agent and their clients.

In this context, implied, apparent, and inherent authorities refer to different concepts whereby they do not arise directly from a formal agreement. Implied authority is not explicitly stated but is inferred from the duties that are necessary for the agent to fulfill their role. Apparent authority arises when a third party perceives that the agent has the authority to act on behalf of the principal, even if such authority has not been formally granted. Inherent authority usually relates to the authority an agent automatically possesses within their role, regardless of specific requests or directions from the principal.