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CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent

Ramesh appoints Suresh as his agent to sell goods in Pune. Before the sale is completed, Ramesh dies. Under the Indian Contract Act, 1872, what is the legal position of the agency?

The agency is terminated by the principal's death. Section 201 says an agency ends when either the principal or the agent dies or becomes of unsound mind, so it neither continues nor passes to the heirs, and the agent's consent is not needed.

  1. AThe agency continues until Suresh completes the sale
  2. BThe agency is terminated by the principal's deathCorrect
  3. CThe agency passes to Ramesh's legal heirs automatically
  4. DThe agency is terminated only if Suresh consents to it

Explanation

Section 201 provides that an agency is terminated by either the principal or the agent dying or becoming of unsound mind. The agency therefore does not continue or pass to the heirs. Suresh's consent is not required for termination by death.

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