Examkin

Question

Difficulty: MediumLaw of Agency: Creation, Authority, and Types of Agents

A timber merchant in Benin appointed a buying agent and privately instructed him not to purchase mahogany logs above ₦200,000 per truckload. However, the merchant had previously informed local sawmill operators that the agent possessed full discretion to negotiate purchases on his behalf. If the agent enters into a contract to buy mahogany logs for ₦230,000 per truckload from a sawmill operator who relied on the merchant's prior statement, under which form of legal authority is the principal bound to the contract?

  1. Apparent (ostensible) authorityAnswer
  2. B
    Implied authority
  3. C
    Express authority
  4. D
    Agency by necessity

Answer

Apparent (ostensible) authority
Apparent (ostensible) authority exists where a principal represents to a third party that an agent has authority to act on their behalf. Even though the principal placed private price restrictions on the agent, the principal is legally bound to the contract because the third party relied on the principal's explicit prior representation.

Step-by-Step Solution

1
Analyze the scope of express instructions given to the agent
The principal gave explicit private instructions limiting purchase prices to ₦200,000 per truckload.
This establishes the boundary of the agent's actual express authority.
2
Examine the representation made by the principal to the third party
The merchant previously represented to third parties (sawmill operators) that the agent had unlimited discretion.
Under commercial law, representations made directly by the principal to third parties create ostensible authority.
3
Determine the legal basis of liability
The principal is bound by apparent (ostensible) authority because the third party acted in good faith reliance on the principal's own representations.
Principals are estopped from denying an agent's authority when they have held out the agent as having such authority to third parties.

Key Concept

Apparent (Ostensible) Authority vs Express Authority
Estimated Time:1m 0s
Rate this question

Topics

Law of Agency: Creation, Authority, and Types of Agents

More questions from this topic