What does "scope of authority" refer to in agency law?

In agency law, "scope of authority" specifically refers to the range of actions allowed for the agent. This defines the limit within which the agent can act on behalf of the principal, including what decisions they can make and what transactions they can undertake. Understanding the scope of authority is critical because it helps determine whether an agent has the right to bind the principal legally.

For instance, if an agent is authorized to negotiate a contract but goes beyond their given authority to make decisions outside of that realm, any actions taken beyond this scope may not be enforceable against the principal. Thus, the concept ensures that both the principal and third parties understand the parameters of the agent's power and limits their liability accordingly.

In contrast, other choices relate to different aspects of agency law that do not define the agent's permitted actions. The principal's ability to act, the duration of the relationship, and the financial obligations involve different legal considerations that are separate from the concept of the agent's scope of authority.