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X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?
- a)An express agency.
- b)An agency by estoppel.
- c)An agency by ratification.
- d)An agency of necessity.
Correct answer is option 'B'. Can you explain this answer?
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X Ltd has two directors, Jai and Harish. Neither of the directors have...
Understanding Agency by Estoppel
Agency by estoppel occurs when a person (the principal) creates an appearance that another person (the agent) has authority to act on their behalf, and a third party relies on that appearance. In this scenario, the following points clarify why option 'B' is correct:
Key Characteristics of Agency by Estoppel:
- Implied Authority: Although Jai does not have express authority to enter contracts alone, he has acted with Harish's acquiescence, implying that Harish accepts Jai's role as the agent.
- Good Faith Reliance: The third party, acting in good faith, believes that Jai has the authority to bind X Ltd in contracts. This belief is based on the consistent practice of Jai entering contracts on behalf of the company.
- Principal's Conduct: Harish's failure to object or intervene when Jai enters contracts creates an impression that Jai has the authority to act on behalf of X Ltd. This is critical in establishing agency by estoppel.
Legal Implications:
- Binding Contracts: The contracts entered into by Jai, under the impression of authority, may be binding on X Ltd due to Harish’s passive acceptance of Jai’s actions.
- Protection for Third Parties: Agency by estoppel protects third parties who rely on the apparent authority of an agent, ensuring they are not left without recourse if the principal later denies the agency.
In conclusion, option 'B' (Agency by Estoppel) is the correct answer as it encapsulates the situation where Jai acts on behalf of X Ltd with implicit approval from Harish, creating a binding relationship with the third party.
Agency by estoppel occurs when a person (the principal) creates an appearance that another person (the agent) has authority to act on their behalf, and a third party relies on that appearance. In this scenario, the following points clarify why option 'B' is correct:
Key Characteristics of Agency by Estoppel:
- Implied Authority: Although Jai does not have express authority to enter contracts alone, he has acted with Harish's acquiescence, implying that Harish accepts Jai's role as the agent.
- Good Faith Reliance: The third party, acting in good faith, believes that Jai has the authority to bind X Ltd in contracts. This belief is based on the consistent practice of Jai entering contracts on behalf of the company.
- Principal's Conduct: Harish's failure to object or intervene when Jai enters contracts creates an impression that Jai has the authority to act on behalf of X Ltd. This is critical in establishing agency by estoppel.
Legal Implications:
- Binding Contracts: The contracts entered into by Jai, under the impression of authority, may be binding on X Ltd due to Harish’s passive acceptance of Jai’s actions.
- Protection for Third Parties: Agency by estoppel protects third parties who rely on the apparent authority of an agent, ensuring they are not left without recourse if the principal later denies the agency.
In conclusion, option 'B' (Agency by Estoppel) is the correct answer as it encapsulates the situation where Jai acts on behalf of X Ltd with implicit approval from Harish, creating a binding relationship with the third party.
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X Ltd has two directors, Jai and Harish. Neither of the directors have...
This is a case of agency created by estoppel between Company X and the third Party.
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X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer?
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X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer?.
X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X Ltd has two directors, Jai and Harish. Neither of the directors have authority to individually enter contracts on behalf of the company. In practice, Jai (with Harish’s acquiescence) enters into all the contracts on behalf of the company. What type of agency has been created when a third party acting in good faith enters into a contract with Jai who states he is acting on behalf of X Ltd?a)An express agency.b)An agency by estoppel.c)An agency by ratification.d)An agency of necessity.Correct answer is option 'B'. Can you explain this answer?.
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