ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Delta Ltd appoints Karim as its sales manager and tells its customers he may agree orders up to 10,000 dollars. Delta privately limits him to 5,000 dollars. Karim agrees an 8,000 dollar order with Lena, who knows nothing of the private limit. Which statement is correct?
Delta Ltd is bound by the 8,000 dollar order. It represented that Karim could agree orders up to 10,000 dollars, and Lena relied on this without notice of the private 5,000 dollar limit, so he had apparent authority. Delta's remedy is against Karim.
- ADelta Ltd is not bound, because Karim exceeded his actual authority
- BDelta Ltd is bound, because Karim acted within his apparent authorityCorrect
- CDelta Ltd is bound only for 5,000 dollars of the order
Explanation
Delta represented to customers that Karim could agree orders up to 10,000 dollars. Lena relied on this without knowledge of the limit, so Karim had apparent authority for the 8,000 dollar order. The private restriction does not bind third parties who are unaware of it. Delta may claim against Karim for exceeding his actual authority.
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