Future Business Leaders of America (FBLA) Business Law Practice Exam

What does the term 'agent's agent' refer to?

1. An agent appointed with the principal's authority

2. An agent who acts in absence of the principal's authorization

3. Someone who manages agents on behalf of an organization

4. A representative of a business in transactions

The correct answer is: An agent who acts in absence of the principal's authorization

The term 'agent's agent' specifically refers to a type of agent who has been authorized to represent the original agent in dealings with third parties. Therefore, the correct choice describes an agent who acts on behalf of another agent, typically within the scope of authority set by the principal. In this context, the concept highlights the delegation of authority and the layered structure in agency relationships, where one agent can empower another to carry out tasks on their behalf. This is particularly relevant in business settings where agents might need to employ others to help manage diverse responsibilities or transactions. The concept is distinct from acting without authority, as mentioned in the incorrect options. While an agent acting without the principal’s authorization may complete certain tasks, their actions would not be considered valid or binding on the principal unless specific conditions apply. The notion of someone managing agents on behalf of an organization also diverges from the principle of 'agent's agent,' focusing more on oversight and management rather than direct representation in transactions. The representation of a business in transactions, while somewhat relevant, does not accurately capture the specific relationship described by ‘agent’s agent.’ Understanding this terminology can clarify the complexities within agency law and the delegation of authority in contractual situations.