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ACCA Applied Skills · Corporate and Business Law (Global) · Agency law

Mara runs a retail business and tells her neighbour Jon, in a casual conversation, that he may buy stock for her from a supplier. Jon then agrees a purchase with the supplier on Mara's behalf. No document was signed. Which statement about the creation of this agency is correct?

An agency can be created by express agreement, and that agreement may be made orally. There is no general requirement that it be in writing, that the agent be paid, or that the agent be registered, so Jon is validly appointed as Mara's agent.

  1. AThe agency is invalid because an agency agreement must always be in writing
  2. BThe agency can be created by express agreement, which may be oralCorrect
  3. CThe agency is invalid unless Jon receives payment from Mara
  4. DThe agency is invalid unless Mara registers Jon as her agent

Explanation

In general an agency may be created by express agreement, and that agreement may be oral. There is no general requirement for writing, payment or registration. The writing option is therefore wrong because formality is only needed in special cases, such as where the law requires a deed for an agent to execute one.

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