ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Delta Co appoints Hana as agent to buy 100 units of stock for Delta Co, with a maximum budget of 50,000. Hana pays 45,000 from her own funds after a supplier demands immediate payment, and she acts within her authority throughout. Delta Co refuses to reimburse her, claiming she should have asked first. Which statement is correct?
Hana can recover the 45,000 from Delta Co. A principal must indemnify an agent for expenses and liabilities properly incurred while acting within authority. This right is separate from commission and does not depend on asking for prior approval.
- AHana can claim an indemnity from Delta Co for the 45,000 she properly incurred in carrying out her authorised dutiesCorrect
- BHana cannot claim, because an agent must always fund the purchase herself unless the agreement says otherwise
- CHana can claim only her agreed commission and not the expenses she incurred
Explanation
A principal must indemnify the agent against liabilities and expenses properly incurred within the agent's authority. The payment was within budget and authority, so Hana is entitled to reimbursement. Commission and indemnity are separate rights.
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