California Real Estate Practice Exam

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What does a warranty of authority ensure?

  1. Limited liability for the salesperson

  2. The agent's right to make decisions

  3. The principal's responsibility for certain actions of the agent

  4. The confidentiality of client information

The correct answer is: The principal's responsibility for certain actions of the agent

A warranty of authority is a guarantee from the principal (person or organization giving authority) that they can legally hold the agent responsible for any actions they take on the principal's behalf. This means that the principal will take responsibility for any legal or financial consequences of the agent's actions within the scope of their authority. Option A, limited liability for the salesperson, is incorrect because a warranty of authority does not limit liability for the salesperson, but rather holds the principal responsible. Option B, the agent's right to make decisions, is incorrect because a warranty of authority does not guarantee the agent's right to make decisions, but rather clarifies the extent of their authority. Option D, the confidentiality of client information, is incorrect because a warranty of authority is not related to the confidentiality of client information, but rather to the principal-agent relationship.

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