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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. What is the strongest reason for the likely result?

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Reject the claim or defense solely because the opposing party disputes a required fact. 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. Treat the formal label attached to the claim or defense as conclusive and disregard facts bearing on the rule's elements. Resolve the dispute on equitable fairness alone without identifying the governing doctrine or its limits.

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