ACCA Applied Skills · Corporate and Business Law (Global) · Agency law
Priya, an agent, signs a contract with Halden Ltd claiming to represent a client, Orrin. In fact Priya had no authority from Orrin and Orrin has refused to ratify. Halden Ltd suffers loss. Against whom does Halden Ltd have a claim, and on what basis?
Halden Ltd can sue Priya for breach of the implied warranty of authority. By acting as agent she impliedly promised she had authority. Orrin has not ratified, so he is not bound by the contract.
- APriya, for breach of the implied warranty of authorityCorrect
- BOrrin, because he was named as principal
- COrrin, in tort for negligent misstatement
- DNo one, because no contract exists
Explanation
An agent who purports to act with authority impliedly warrants that authority exists. If it does not and the principal does not ratify, the agent is liable for breach of warranty of authority for the third party's loss. Orrin is not liable since he never authorised or ratified.
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