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

Vikram, the principal, dies while his agent Pooja is holding goods entrusted to her for sale. Pooja's agency terminates on his death. According to the Indian Contract Act, 1872, what is Pooja's duty?

Pooja must take, on behalf of Vikram's representatives, all reasonable steps for the protection and preservation of the interests entrusted to her. Termination of the agency by the principal's death does not release the agent from this duty under the Act.

  1. ATake on behalf of Vikram's representatives all reasonable steps to protect and preserve the interests entrusted to herCorrect
  2. BSell the goods immediately and keep the proceeds as compensation
  3. CDo nothing, because her duties ended with the agency
  4. DReturn the goods only to the buyer she was negotiating with

Explanation

When an agency ends by the principal's death or unsoundness of mind, the agent must take, for the late principal's representatives, all reasonable steps to protect and preserve the interests entrusted to her (Section 209). Doing nothing is wrong because the duty survives termination. Keeping proceeds is not permitted at all.

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