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CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent

A principal who appointed Meera as agent becomes of unsound mind. Meera holds goods entrusted to her for the principal. Under the Act, what must Meera do?

Meera must take all reasonable steps to protect and preserve the interests entrusted to her, acting on behalf of the principal's representatives. Section 209 imposes this duty when the agency ends by the principal's death or unsoundness of mind, so her obligations do not end abruptly.

  1. ATake all reasonable steps to protect and preserve the interests entrusted to her, on behalf of the principal's representativesCorrect
  2. BHand over the goods to the creditors of the principal at once
  3. CSell the goods immediately and keep the proceeds as commission
  4. DDo nothing, since her duties end as soon as the agency ends

Explanation

Section 209 says that when an agency is terminated by the principal dying or becoming of unsound mind, the agent must take all reasonable steps for the protection and preservation of the interests entrusted to him, on behalf of the principal's representatives. Her duties therefore do not simply cease.

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