[SOLVED] Gilbert Church owned a horse breeding farm

Gilbert Church owned a horse breeding farm managed by Herb Bagley. Advertisements for the breeding rights to one of Church Farm’s stallions, Imperial Guard, directed all inquiries to “Herb Bagley, Manager.” Vern and Gail Lundberg bred Thoroughbred horses. The Lundbergs contacted Bagley and executed a preprinted contract giving them breeding rights to Imperial Guard “at Imperial Guard’s location,” subject to approval of the mares by Church. Bagley handwrote a statement on the contract that guaranteed the Lundbergs “six live foals in the first two years.” He then signed it “Gilbert G. Church by H. Bagley.”
The Lundbergs bred four mares, which resulted in one live foal. Church then moved Imperial Guard from Illinois to Oklahoma. The Lundbergs sued Church for breaching the contract by moving the horse. Church claimed that Bagley was not authorized to sign contracts for Church or to change or add terms, but only to present preprinted contracts to potential buyers. Church testified that although Bagley was his farm manager and the contact person for breeding rights, Bagley had never before modified the preprinted forms or signed Church’s name on them. The jury found in favor of the Lundbergs and awarded $147,000 in damages. Church appealed.
Defendant contends that plaintiffs have failed to establish that Bagley had apparent authority to negotiate and sign the Lundberg contract for Church Farm.
The party asserting an agency has the burden of proving its existence but may do so by inference and circumstantial evidence. Additionally, an agent may bind his principal by acts which the principal has not given him actual authority to perform, but which he appears authorized to perform. An agent’s apparent authority is that authority which “the principal knowingly permits the agent to assume or which he holds his agent out as possessing. It is the authority that a reasonably prudent man, exercising diligence and discretion, in view of the principal’s conduct, would naturally suppose the agent to possess.”
Plaintiffs produced evidence at trial that Gil Church approved the Imperial Guard advertisement listing Herb Bagley as Church Farm’s manager, and directing all inquiries to him. Church also permitted Bagley to live on the farm and to handle its daily operations. Bagley was the only person available to visitors to the farm. Bagley answered Church Farm’s phone calls, and there was a preprinted signature line for him on the breeding rights package.
The conclusion is inescapable that Gil Church affirmatively placed Bagley in a managerial position giving him complete control of Church Farm and its dealings with the public. We believe that this is just the sort of “holding out” of an agent by a principal that justifies a third person’s reliance on the agent’s authority.
We cannot accept defendant’s contention that the Lundbergs were affirmatively obligated to seek out Church to ascertain the actual extent of Bagley’s authority. Where an agent has apparent authority to act, the principal will be liable in spite of any undisclosed limitations the principal has placed on that authority.
The state appellate court affirmed the lower court’s judgment in favor of the Lundbergs for $147,000. Because Church allowed circumstances to lead the Lundbergs to believe Bagley had the authority to negotiate and sign the contract, Church was bound by Bagley’s actions.

Required:
The court held that Church had allowed the Lund bergs to believe that Bagley was his agent. What steps could Church have taken to protect himself against a finding of apparent authority?
Does a principal have an ethical responsibility to inform an unaware third party that an apparent agent does not in fact have the authority to act on the principal’s behalf?

Question: Gilbert Church owned a horse breeding farm