An Agent Contracted with a Third Party on Behalf of a Principal

question 29

Multiple Choice

An agent contracted with a third party on behalf of a principal, but went beyond both his actual and apparent authority. The third party was never paid. Which of the following indicates the legal position of the third party?

• A) He can successfully sue the principal because the principal is always liable for the actions of his agent.
• B) He can successfully sue the agent for breach of warranty of authority if the principal fails to ratify the contract.
• C) Since the agent had no authority, the third party has no remedy against anyone.
• D) The third party can ratify the deal and force the principal to go through with it.
• E) He can sue the agent for the tort of nuisance.

---

Definitions:

Fixed Cost

Fixed cost refers to expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Sunk Cost

Expenditures that have already been incurred and cannot be recovered, which should not affect future decision-making.

Opportunity Cost

Represents the benefit that is missed or given up when an investor, individual, or business chooses one alternative over another.

Ticket Price

The cost associated with purchasing a ticket to gain entry to an event, performance, or mode of transportation.