ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Marta owns a boutique and tells Leon, a friend, to buy fabric on her behalf from a supplier. Leon tells the supplier he is buying for Marta, and Marta had given him clear authority to do so. Which statement best describes the legal relationship created between Marta and Leon?
Marta is the principal and Leon is her agent. Agency arises when one person is authorised to act for another and to bring that person into contractual relations with third parties. Nothing suggests employment or a profit-sharing partnership.
- APrincipal and agent, because Leon has authority to bring Marta into a contract with a third partyCorrect
- BEmployer and employee, because Leon is working under Marta's instructions
- CPartners, because Leon and Marta are carrying on a business together
Explanation
An agency exists where one person (the agent) has authority to create legal relations between the principal and a third party. Leon is not stated to be paid, controlled as an employee, or sharing profits, so employment or partnership is not indicated.
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