ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Nadia owns a boutique in Nairobi. She tells Omar, 'Please buy 20 dresses from Zuri Ltd for my shop, and I will pay you a fee of 5% of the price.' Omar signs a purchase contract with Zuri Ltd in Nadia's name. Which statement best describes the legal position?
Omar is an agent and the contract is between Nadia and Zuri Ltd. Nadia authorised him to buy on her behalf and he contracted in her name, so the contract is formed between principal and third party, not with the agent personally.
- AOmar is an agent, and the contract is between Nadia and Zuri LtdCorrect
- BOmar is an agent, and the contract is between Omar and Zuri Ltd
- COmar is an employee, so he is not an agent
- DOmar is a partner of Nadia, so he is personally liable on the contract
Explanation
An agency arises when a principal authorises an agent to create legal relations with a third party on the principal's behalf. Omar was authorised to contract for Nadia and did so in her name, so the contract binds Nadia and Zuri Ltd. Option B is wrong because an agent who contracts openly for a named principal is normally not a party to the contract.
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