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In case the contract of agency has been terminated and a third party enters into a contract with the agent without knowing this fact, then
- a)The contract will be binding on the principal
- b)The contract will not be binding on the principle
- c)The contract will only be binding on the agent
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
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In case the contract of agency has been terminated and a third party e...
Explanation:
Termination of Agency Contract
When the contract of agency is terminated, the agent no longer has the authority to act on behalf of the principal. This means that the agent cannot bind the principal to any new contracts or obligations.
Third Party Contract
If a third party enters into a contract with the agent without knowledge of the termination of the agency contract, the situation becomes more complex. In this case, the third party may believe that they are entering into a valid contract with the agent on behalf of the principal.
Binding on the Principal
According to the law of agency, if a third party enters into a contract with an agent who no longer has authority to act on behalf of the principal, the contract may still be binding on the principal. This is known as the doctrine of "apparent authority." If the third party had no knowledge of the termination of the agency contract and believed in good faith that the agent had the authority to act on behalf of the principal, the principal may still be held liable for the contract.
Therefore, in the given scenario, the contract entered into by the third party with the agent would be binding on the principal, even though the agency contract had been terminated. This is to protect the innocent third party who entered into the contract in good faith.
In conclusion, when a third party enters into a contract with an agent without knowledge of the termination of the agency contract, the contract may still be binding on the principal under the doctrine of apparent authority.
Termination of Agency Contract
When the contract of agency is terminated, the agent no longer has the authority to act on behalf of the principal. This means that the agent cannot bind the principal to any new contracts or obligations.
Third Party Contract
If a third party enters into a contract with the agent without knowledge of the termination of the agency contract, the situation becomes more complex. In this case, the third party may believe that they are entering into a valid contract with the agent on behalf of the principal.
Binding on the Principal
According to the law of agency, if a third party enters into a contract with an agent who no longer has authority to act on behalf of the principal, the contract may still be binding on the principal. This is known as the doctrine of "apparent authority." If the third party had no knowledge of the termination of the agency contract and believed in good faith that the agent had the authority to act on behalf of the principal, the principal may still be held liable for the contract.
Therefore, in the given scenario, the contract entered into by the third party with the agent would be binding on the principal, even though the agency contract had been terminated. This is to protect the innocent third party who entered into the contract in good faith.
In conclusion, when a third party enters into a contract with an agent without knowledge of the termination of the agency contract, the contract may still be binding on the principal under the doctrine of apparent authority.
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In case the contract of agency has been terminated and a third party enters into a contract with the agent without knowing this fact, thena)The contract will be binding on the principalb)The contract will not be binding on the principlec)The contract will only be binding on the agentd)None of the aboveCorrect answer is option 'A'. Can you explain this answer?
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