diff --git a/packages/cli/src/auth.ts b/packages/cli/src/auth.ts
index 9ea908d..30f7d5e 100644
--- a/packages/cli/src/auth.ts
+++ b/packages/cli/src/auth.ts
@@ -1,6 +1,6 @@
-import * as fs from 'fs';
-import * as path from 'path';
-import * as os from 'os';
+import fs from 'node:fs';
+import * as path from 'node:path';
+import * as os from 'node:os';
 
 export function getApiKey(): string {
   // 1. Check environment variable
@@ -23,7 +23,6 @@ export function getApiKey(): string {
     console.error('Warning: could not read config file:', configPath);
   }
 
-  // 3. Neither found, exit with error message
-  console.error('No API key found. Set JULES_API_KEY or run: jules_cli setup');
-  process.exit(1);
+  // 3. Neither found, throw error
+  throw new Error('No API key found. Set JULES_API_KEY or run: jules_cli setup');
 }
diff --git a/packages/cli/test/client.test.ts b/packages/cli/test/client.test.ts
new file mode 100644
index 0000000..303ff4b
--- /dev/null
+++ b/packages/cli/test/client.test.ts
@@ -0,0 +1,66 @@
+import { JulesClient } from '../src/client';
+import assert from 'node:assert';
+import { test } from 'node:test';
+import fs from 'node:fs';
+import os from 'node:os';
+
+test('JulesClient constructor uses provided API key', () => {
+  const apiKey = 'test-api-key';
+  const client = new JulesClient(apiKey);
+  assert.strictEqual((client as any).apiKey, apiKey);
+});
+
+test('JulesClient constructor uses API key from environment if not provided', (t) => {
+  const originalEnvKey = process.env.JULES_API_KEY;
+  process.env.JULES_API_KEY = 'env-api-key';
+  t.after(() => {
+    process.env.JULES_API_KEY = originalEnvKey;
+  });
+
+  const client = new JulesClient();
+  assert.strictEqual((client as any).apiKey, 'env-api-key');
+});
+
+test('JulesClient constructor uses API key from config file if not provided via env', (t) => {
+  const originalEnvKey = process.env.JULES_API_KEY;
+  delete process.env.JULES_API_KEY;
+  t.after(() => {
+    process.env.JULES_API_KEY = originalEnvKey;
+  });
+
+  const configPath = os.homedir() + '/.config/jules/config.json';
+
+  t.mock.method(fs, 'existsSync', (path: string) => {
+    if (path === configPath) return true;
+    return false;
+  });
+
+  t.mock.method(fs, 'readFileSync', (path: string) => {
+    if (path === configPath) {
+      return JSON.stringify({ apiKey: 'config-api-key' });
+    }
+    throw new Error('File not found');
+  });
+
+  const client = new JulesClient();
+  assert.strictEqual((client as any).apiKey, 'config-api-key');
+});
+
+test('JulesClient constructor throws error if no API key is found anywhere', (t) => {
+  const originalEnvKey = process.env.JULES_API_KEY;
+  delete process.env.JULES_API_KEY;
+  t.after(() => {
+    process.env.JULES_API_KEY = originalEnvKey;
+  });
+
+  t.mock.method(fs, 'existsSync', (path: string) => {
+    if (path.includes('.config/jules/config.json')) return false;
+    return true; // allow other existsSync calls to proceed normally if any
+  });
+
+  assert.throws(() => {
+    new JulesClient();
+  }, {
+    message: 'No API key found. Set JULES_API_KEY or run: jules_cli setup'
+  });
+});