Lyle Is Thelma's Agent

question 328

Multiple Choice

Lyle is Thelma's agent. Thelma has made it clear to Lyle that she does not want him to sign the contracts that he negotiates; she retains that power. If, despite Thelma's instructions, Lyle negotiates and signs a contract with Tom committing Thelma to spend thousands of dollars, what will the consequences of Lyle's actions be?

• A) Lyle must pay Tom out of his own pocket
• B) Tom may sue Lyle but not Thelma to enforce the contract
• C) Tom can be justified in presuming Lyle had authority to sign the contract only if Tom asked Thelma
• D) if Tom was justified in presuming Lyle had authority to sign the contract, Thelma will be responsible
• E) neither Lyle nor Thelma will be responsible for paying because Lyle exceeded his duty of accounting to Thelma

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Definitions:

Cash Flow

Cash Flow is the total amount of money being transferred into and out of a business, especially as affecting liquidity. It is often considered in terms of net cash flow, which is income minus expenses.

Project

A temporary endeavor designed to produce a unique product, service, or result with specific objectives.

WACC

The Weighted Average Cost of Capital is determined by calculating a firm's capital cost, with proportional weights assigned to each category of capital.

NPV

Net Present Value, a calculation used to assess the profitability of an investment by discounting future cash flows to their present value.