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

Karan, an agent, has express authority to name another person to act for the principal in the business of agency. He names Divya for part of the business. Later Karan's own authority is terminated. Which statement is correct?

Divya is an agent of the principal for the part of the business entrusted to her, not a sub-agent. Section 194 says so where the agent had authority to name another person, so Section 210's automatic termination of sub-agents' authority does not apply to her.

  1. ADivya is a sub-agent, so her authority ends automatically with Karan's
  2. BDivya is an agent of the principal for that part of the business, not a sub-agent, so Section 210 does not end her authority automaticallyCorrect
  3. CDivya becomes the agent of Karan alone
  4. DDivya is a surety for Karan

Explanation

Under Section 194, a person named by an agent holding express or implied authority to name another is not a sub-agent but an agent of the principal for that part of the business. Section 210 ends the authority of sub-agents on termination of the agent's authority, so it does not apply to Divya in this way. The first option wrongly treats her as a sub-agent.

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