What does the Implied Warranty of Authority protect the principal from?

The Implied Warranty of Authority serves a crucial role in agency law by protecting the principal from liability when an agent makes representations or enters into contracts on their behalf without actual authority. This warranty assures third parties that the agent has the authority to act and bind the principal to the agreement. When this warranty is implied, if the agent acts outside their scope of authority, the principal can be sheltered from the repercussions of that unauthorized action.

For example, if an agent enters a contract with a third party purporting to have the authority to do so, and it turns out they do not, the third party can seek remedy for breach against the agent rather than the principal. This means that the principal is not held liable for actions taken by the agent that were outside their authorized power, allowing them to avoid unexpected financial consequences and legal claims tied to unauthorized actions.