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

question 31

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:

Assembly Department

A section within a manufacturing facility where components are assembled together to create a finished product.

First-In, First-Out Method

An inventory valuation method in which the goods first purchased or produced are the first to be used or sold.

Mixing Department

A specific sector within a manufacturing facility where raw materials are combined or processed before further manufacturing.

Equivalent Unit

A measurement used in cost accounting to express the amount of work done on incomplete units in terms of fully completed units, facilitating cost analysis.