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After a business relationship breaks down, owners, managers, and outsiders dispute who is bound and who must pay. A manager signed a supply agreement after receiving mixed instructions from the owner. The parties disagree about the legal effect of those facts. Which statement is most accurate?

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Import a rule from a nearby issue instead of applying the rule triggered by these facts. Stop the analysis once the proponent states a plausible rule, without addressing the strongest counterargument. Treat the formal label attached to the claim or defense as conclusive and disregard facts bearing on the rule's elements. The court should resolve the dispute by applying the operative rule to the material facts: Agency authority turns on actual authority, apparent authority traceable to the principal, ratification, and the reasonableness of the third party's reliance.

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