Assume an agent is given authority by the principal to sell a property. The prin

Question

Assume an agent is given authority by the principal to sell a property. The principal only states that the agent may sell the property and the agent is given no further instructions. The agent reasonably believes that it will be necessary to perform $10,000 worth of improvements on the property in order to sell it. Therefore, the agent contracts to have these improvements made. He/she then sells the property. The principal believes that the improvements were not authorized and refuses to reimburse the agent for the expenses associated with the sale. Discuss the rights and liabilities of the principal and agent. Should the principal be forced to reimburse the agent? If the principal continues to refuse to reimburse the agent, what action may be taken by the agent? If the parties were to engage in a lawsuit, who would win? Why? If your answer depends on information not provided in the scenario, specify what further information you would need to render a firm opinion. Busines Law class.

Explanation / Answer

In this case the principal can not be forced to reimburse the agent,because the improvements made were legally not authorised by the principal to the agent,the agent was only instructed to sell the property on behalf of the principal.

If the principal continues to refuse to reimburse the agent,the agent may either terminate the contract of agency or file a suit against the principal to recover the money invested by him for the improvement of the property.

If the parties were to engage in a lawsuit,the principal would win,because the principal is not liable to reimburse the agent,when the agent exceeds his actual authority without the consent of the principal unless in case of an emergency.It is the duty of an agent,in case of difficulty to communicate with his principal and seek to obtain his instruction before taking any step.In this case the agent should have communicated with the principal before investing $10000 on the improvement of the property before the sale.

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