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IAI Actuarial Core Principles · Business Management · Trusts and agency

Meera, a Mumbai-based actuarial consultant, appoints Rohan in writing to negotiate and sign a data-sharing agreement with a vendor on her behalf. Rohan signs it within the limits of his instructions. Under the Indian law of agency, what is the legal effect of the contract?

The contract binds Meera and the vendor directly. Because Rohan acted within his actual authority, his act is treated in law as the act of his principal, so no further ratification or personal liability of the agent is needed.

  1. AIt binds Meera and the vendor directly, as though Meera had made the contract herselfCorrect
  2. BIt binds only Rohan and the vendor, because he signed it
  3. CIt binds Meera only if she also signs a ratification afterwards
  4. DIt is voidable at the vendor's option because Rohan is not a party
  5. It binds Meera only to the extent of Rohan's personal assets

Explanation

An act done by an agent within actual authority is treated as the principal's act. The contract therefore creates rights and liabilities directly between principal and third party. Ratification is only needed where the agent acted without authority, so the option requiring it is wrong.

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