What does a warranty of authority do?

A warranty of authority is crucial in real estate transactions as it establishes that an agent has the legal authority to act on behalf of a principal or client. By assigning legal responsibility for the agent's actions, it assures third parties that the agent has the requisite authority to enter into agreements and conduct business in the principal's name. This warranty aids in limiting liability, as it confirms that the agent is acting within their given powers.

When agents present themselves as having authority, they effectively bind the principal to the transactions they execute. Should an agent act beyond their authorized scope, they could potentially expose themselves to personal liability, but the warranty of authority protects the interests of those relying on the agent’s representation. This underscores the importance of ensuring that any representations or actions taken by an agent reflect their actual limits of authority.

In summary, it is the legal framework that provides assurance to clients and third parties that the agent is duly authorized to perform actions that will bind the principal, thereby alleviating concerns over unauthorized actions.