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

Nadia ships perishable fruit through agent Hal, who is in a distant port. The buyer defaults and the fruit will rot within hours. Hal cannot contact Nadia, and sells it locally at a reasonable price in good faith. Which statement best describes whether Nadia is bound?

Nadia is bound because Hal acted under agency of necessity. There was a genuine emergency, no way to obtain instructions, and Hal acted reasonably and in good faith for her benefit, so no prior authority or later ratification was needed.

  1. ANot bound, because Hal had no express authority to sell
  2. BBound only if she later ratifies the sale
  3. CBound, because Hal acted under agency of necessity in an emergencyCorrect
  4. DBound only if Hal had a written power of attorney

Explanation

Agency of necessity arises where there is a genuine emergency, it is impossible to obtain instructions, the agent acts in good faith in the principal's interests, and the action is reasonable. All are present here. Ratification is not required, so that option is wrong.

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