CMA Intermediate · Business Laws and Ethics · Special Contracts - Indemnity and Guarantee; Bailment and Pledge; Laws of Agency
Mehta Textiles, Surat, appoints Vikram to buy and sell goods on its behalf and Vikram receives no payment from the firm, and Vikram is a minor. Mehta Textiles later claims it is not bound by contracts Vikram made with third parties. Under the Indian Contract Act, 1872, what is the position?
The principal is bound. Under the Act a minor can be appointed as an agent and no consideration is needed to create an agency, so contracts made within authority bind the principal towards third parties, although the minor agent is not personally responsible to the principal.
- AThe principal is bound, because a person who is not of age may be appointed an agent and the principal remains liable to third partiesCorrect
- BThe principal is not bound, because a minor cannot be appointed an agent
- CThe principal is bound only if consideration was paid to Vikram
- DThe appointment is void because an agent must be a major
Explanation
No consideration is necessary to create an agency, and a minor may be appointed agent. The principal is bound by the agent's acts towards third persons, though the minor agent is not answerable to the principal for his acts. The distractors wrongly require consideration or majority.
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