ACCA F4 - Corp and Business Law (ENG)

166 10: Agency law  Part D The formation and constitution of business organisations

Quick Quiz

1 Fill in the blanks in the statements, using the words in the boxes below.

Agency is the (1)........................ which exists between two (2)...................... persons. They are the

(3)............... and the agent, in which the function of the agent is to form a (4)................ between

their (5)................ and a (6)...............

 relationship  contract  legal

 third party  principal  principal

2 A principal may, in certain circumstances, ratify the acts of the agent which has retrospective effect.

True^

False

3 What is the best definition of ostensible authority?

(a) The authority which the principal represents to other persons that they have given to the agent.

(b) The authority implied to other persons by the agent's actions.

4 What point of law is explained in the case of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd

1964?

5 Which of the following are circumstances where an agent may enforce a contract?

(a) Where the agent is intended to take personal liability

(b) Where it is usual business practice to allow enforcement

(c) Where the agent acts on their own behalf even if they purport to act for a principal

(i) (a), (b)

(ii) (b), (c)

(iii) (a), (c)

(iv) (a), (b) and (c)

Answers to Quick Quiz

1 (1) relationship (2) legal (3) principal

(4) contract (5) principal (6) third party

2 True. Principals may ratify retrospectively.

3 (a). The key word is represents.

4 A director may have ostensible authority to contract if although they do not have their express permission,

the other directors are aware that contracts are being made and do nothing to prevent it.

5 (iv). They are all valid circumstances.

(^) Now try the questions below from the Practice Question Bank
Number
22, 23