How can a principal limit an agent's authority?

A principal can limit an agent's authority by setting clear terms and responsibilities within the agency agreement. This formal documentation outlines the specific powers granted to the agent and can explicitly restrict the agent's actions to ensure that they operate within the limits defined by the principal. By defining the scope of authority, the principal can include specific tasks the agent is permitted to perform, as well as any areas where the agent must refrain from acting. This clarity helps to protect the interests of both the principal and the agent, ensuring that the agent does not overstep their bounds and acts in alignment with the principal's expectations.

The other options do not effectively establish limitations on an agent's authority. Allowing the agent to act on any and all matters would actually expand their authority rather than limit it. Permitting the agent to operate in different states freely does not inherently define any constraints and could lead to unauthorized actions outside the principal's control. Maintaining verbal communication only lacks the formality and specificity necessary to clearly delineate authority, which may result in misunderstandings about the scope of the agent's powers.