If an Agent Makes a Contract with a Third Party

question 86

Multiple Choice

If an agent makes a contract with a third party that expressly excludes the principal from the contract,which statement effectively describes the liability of the principal?

• A)The principal is liable on the contract only if the principal is an unidentified principal.
• B)The principal is liable on the contract unless the principal gave the agent authority in writing to make the agreement with the third party.
• C)The principal is liable on the contract only if the principal is a partially disclosed principal.
• D)The principal is liable on the contract because it is unconscionable to exclude a principal from a contract.
• E)The principal is not liable on the contract.

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Definitions:

Estimated Inventory Returns

The estimated amount of goods a company predicts will be returned by customers after purchase.

Liability Account

An accounting record that tracks the monies owed by a company to outside parties or obligations that will result in future outflows of resources.

Revenue Account

An account that tracks the income generated from normal business operations over a certain period.

Sales Taxes

Taxes imposed by governments on the sale of goods and services, collected by retailers and passed on to tax authorities.