Question

Passage:
In classical Roman civil law (ius civile), a fundamental tenet held that an individual could not enter into a binding contract on behalf of another; legal obligations were strictly personal to the contracting parties. This stricture posed a formidable barrier to maritime commerce and large-scale manufacturing during the late Republic, as wealthy patrician elites (domini) routinely conducted enterprise through enslaved managers (institores) or subordinate family members (filii familias). Under the rigid rules of early civil law, third-party creditors dealing with an enslaved agent could only claim against the agent’s peculium—a segregated fund of property allotted to the subordinate by the master—and the master’s financial exposure was strictly capped at the total value of that peculium at the time of judgment (actio de peculio).

Recognizing that this limitation discouraged commercial lending and disincentivized trade partners who lacked visibility into the internal accounting of a household, the Roman praetor introduced procedural remedies known collectively as actiones adiecticiae qualitatis (actions of an added quality). Among the most significant of these was the actio institoria. Under the edict governing this action, if a master appointed a person—whether enslaved, freeborn, or a dependent—to manage a terrestrial retail business, workshop, or merchant enterprise, the master assumed full, joint, and direct liability (in solidum) for all contractual debts incurred by that manager, provided the transactions fell strictly within the defined scope of the enterprise's managerial mandate (praepositio).

Crucially, the praetorian edict required the master to publicly display the terms and boundaries of the manager’s authority at the place of business, written in clear, legible script in a conspicuous location. If a creditor entered into a contract that exceeded the explicitly posted limits—for example, extending a loan for real estate acquisition when the manager was only authorized to purchase raw leather—the master could successfully raise a defense (exceptio), thereby reverting the creditor's legal recourse to the older, capped actio de peculio. Furthermore, Roman jurists like Ulpian clarified that third-party creditors were not obligated to ascertain whether the master had directly profited from the specific transaction; the mere presence of an unbroken managerial appointment (praepositio) within the posted operational limits was sufficient to establish total paternal liability.

According to the passage, which of the following is true regarding a master's liability under the rules of the actio institoria?