How does implied warranty benefit the third party in an agency relationship?

Implied warranty plays a crucial role in safeguarding third parties within an agency relationship by ensuring that they are protected against deceit or breaches of contract. When an agent acts on behalf of a principal, there exists an assumption that the agent possesses the necessary authority and integrity to represent the principal's interests fully. The implied warranty asserts that the agent has not misled the third party regarding the nature of the transaction or the authority to act.

This protection is particularly significant in art transactions where misrepresentation could lead to significant financial loss or legal complications for third parties who rely on the agent's words or actions. If the agent does not have the authority they claim, the implied warranty allows third parties to seek remedies if they have acted in good faith based on the agent's representations.

In contrast, the other choices do not address the essential protective function of the implied warranty in the context of an agency relationship. Increasing the sale price does not directly relate to the integrity or authority of the agent, recovering damages is more about the principal's rights rather than third-party protection, and the notion of allowing the agent to act freely lacks the accountability that the implied warranty brings to the relationship. Therefore, the correct understanding centers on how it shields third parties from potential deceit or unauthorized actions by