After Bart and Veronica were involved in an automobile accident, Bart retained Rhonda as an attorney to negotiate an out-of-court settlement. After a lengthy discussion with Veronica's insurance company, Rhonda settled the case for $5,000. However, Bart personally rejected the $5,000 offer. Veronica filed suit to enforce the settlement, claiming that Rhonda was authorized to accept the settlement on behalf of Bart. Discuss Rhonda's express, implied, and apparent authority.

Question

What will be an ideal response?

Answer 1

Express authority usually is created by the principal telling his agent what to do in specific terms. Implied authority consists of those powers that the agent reasonably infers are necessary to carry out his express authority. Thus, to determine the existence and scope of express and implied authority, the focus is primarily on the principal and agent. Apparent authority, however, differs both in concept and focus. To determine the existence and scope of apparent authority, the focus is on the principal and the third party. Apparent authority is created by the conduct of the principal which causes a third person reasonably to believe that another has the authority to act for the principal. Rhonda did not have express authority to settle the case because Bart never specifically gave her that power. Further, she did not have implied authority because, as an attorney, Rhonda should have realized that in processing a case in court her authority was limited to procedural matters. She should not have inferred that she had the authority to surrender any of Bart's substantive rights. Finally, Bart did nothing to lead Veronica or her attorney to reasonably believe that Rhonda had the final authority to settle the claim just because she negotiated the settlement. Accordingly, Rhonda had no apparent authority.