When a Principal Tells an Agent Not to Enter into a Contract

question 59

Multiple Choice

When a principal tells an agent not to enter into a contract or behave in a particular manner and the agent does so regardless, the principal will still be liable for the legal consequences of the agent's act provided that, among other things:

• A)The principal has done something which has the effect of holding the agent out as having the necessary authority.
• B)The third party has suffered detriment and damages are an inappropriate remedy.
• C)The third party knew that the agent did not have actual authority but thought on reasonable grounds that the agent had apparent authority.
• D)The principal ought to have foreseen that the agent would do the act or enter into the contract.

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Definitions:

Liquidated Damages

Pre-determined damages agreed upon by the parties in a contract to be paid in the event of a breach.

Reasonable Expenses

Costs incurred that are considered fair, appropriate, and necessary for the circumstances.

Substitute Widgets

Hypothetical or actual replacement products that serve the same function or purpose as another product in a market context.

Incidental Damages

Financial compensation for reasonably associated losses stemming from a breach of contract, aside from direct damage costs.