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A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.
- a)A need not make compensation to his principal in respect of any loss thereby sustained
- b)A can partially make compensation to his principal in respect of any loss thereby sustained
- c)A must make compensation to his principal in respect of any loss thereby sustained
- d)None of these
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
A, an agent for the sale of goods, having authority to sell on credit,...
Understanding the Scenario
In this case, A, acting as an agent, sells goods to B on credit without conducting the necessary inquiries into B's solvency. At the time of the sale, B is insolvent, leading to potential losses for A's principal.
Legal Responsibility of the Agent
- As an agent, A has a fiduciary duty to act in the best interest of the principal.
- This includes making reasonable inquiries about a buyer's ability to pay, particularly when selling on credit.
Consequences of Negligence
- By failing to assess B's creditworthiness, A has acted negligently.
- This negligence directly contributes to the principal's loss when B defaults on payment due to insolvency.
Compensation to the Principal
- According to agency law, agents are liable for losses caused by their negligence or breach of duty.
- Since A did not fulfill his duty of inquiry, he is obliged to compensate the principal for the losses incurred from the sale to the insolvent B.
Conclusion
- Therefore, A must make compensation to his principal in respect of any loss thereby sustained.
- This ensures that agents adhere to their responsibilities and protect their principal's interests.
In summary, the correct answer is option 'C' because A’s negligence in not verifying B's solvency means he is liable for the resulting losses to the principal.
In this case, A, acting as an agent, sells goods to B on credit without conducting the necessary inquiries into B's solvency. At the time of the sale, B is insolvent, leading to potential losses for A's principal.
Legal Responsibility of the Agent
- As an agent, A has a fiduciary duty to act in the best interest of the principal.
- This includes making reasonable inquiries about a buyer's ability to pay, particularly when selling on credit.
Consequences of Negligence
- By failing to assess B's creditworthiness, A has acted negligently.
- This negligence directly contributes to the principal's loss when B defaults on payment due to insolvency.
Compensation to the Principal
- According to agency law, agents are liable for losses caused by their negligence or breach of duty.
- Since A did not fulfill his duty of inquiry, he is obliged to compensate the principal for the losses incurred from the sale to the insolvent B.
Conclusion
- Therefore, A must make compensation to his principal in respect of any loss thereby sustained.
- This ensures that agents adhere to their responsibilities and protect their principal's interests.
In summary, the correct answer is option 'C' because A’s negligence in not verifying B's solvency means he is liable for the resulting losses to the principal.
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Community Answer
A, an agent for the sale of goods, having authority to sell on credit,...
Explanation:
- Agent's Authority: A, as an agent, has the authority to sell goods on credit, but this authority does not absolve him from the responsibility of conducting proper inquiries into the solvency of the buyer.
- Negligence: A's failure to inquire about B's solvency before extending credit constitutes negligence on the part of the agent.
- Insolvency of B: Since B was insolvent at the time of the sale, it was crucial for A to verify B's financial status to avoid any potential loss for the principal.
- Compensation: A must make compensation to his principal for any loss sustained due to his negligence in not conducting the necessary inquiries before the sale to an insolvent party.
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A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. Can you explain this answer?
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A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. 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 A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. 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 A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. Can you explain this answer?.
A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. 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 A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. 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 A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. Can you explain this answer?.
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A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual inquires as to the solvency of B. B at the time of such sale is insolvent.a)A need not make compensation to his principal in respect of any loss thereby sustainedb)A can partially make compensation to his principal in respect of any loss thereby sustainedc)A must make compensation to his principal in respect of any loss thereby sustainedd)None of theseCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
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