New York Law (NYLE) Practice Exam

Under the speaking agent rule in New York, when is a statement made by an authorized agent binding on the principal?

1. Only if the agent had authority to speak on the matter.

2. Regardless of the agent's knowledge about the matter.

3. Only in the presence of other witnesses.

4. When the agent was directly appointed for that statement.

The correct answer is: Only if the agent had authority to speak on the matter.

The speaking agent rule in New York establishes that a statement made by an authorized agent can be binding on the principal when the agent has the authority to speak on the matter at hand. This emphasizes the importance of the agent's designation for specific matters or subjects related to the principal's business. If the agent has the appropriate authority—whether by express appointment, implied authority, or through their role within the organization—the statement they make can legally bind the principal. In this context, the authority is pivotal. An agent who lacks such authority cannot create binding obligations, which reinforces the necessity of understanding the scope of the agent’s powers. The agent's capability or the context in which the statement is made is subordinate to the fact that they were authorized to act for the principal on that matter. The other choices do not accurately reflect the legal principles surrounding the speaking agent rule. For instance, options that suggest the agent's knowledge about the matter or the need for witnesses does not alter the binding nature of the statement if the agent is authorized to speak. Similarly, the necessity for the agent to be directly appointed for making that specific statement isn't a required condition for binding the principal; rather, the agent simply needs to have the right level of authority regarding the matter discussed.