Bolt Corp. dismissed Ace as its general sales agent and notified all of Ace's known customers by letter. Young Corp., a retail outlet located outside of Ace's previously assigned sales territory, had never dealt with Ace. Young knew of Ace as a result of various business contacts. After his dismissal, Ace sold Young goods, to be delivered by Bolt, and received from Young a cash deposit for 20% of the purchase price. It was not unusual for an agent in Ace's previous position to receive cash deposits. In an action by Young against Bolt on the sales contract, Young will:
a.Lose, because Ace lacked any express authority to make the contract.
b.Lose, because Ace lacked any implied authority to make the contract.
c.Win, because Bolt's notice was inadequate to terminate Ace's apparent authority.
d.Win, because a principal is an insurer of an agent's acts.
Answer:C
Choice "C" is correct. Although Bolt gave known customer's notice of Ace's dismissal, some courts might also require a notice placed in a newspaper to terminate Ace's apparent authority as to people, like Young, who had heard of Ace.
Choice "b" is incorrect. Although Ace lacked implied authority, a court might find that he had apparent authority since Bolt had held Ace out as its agent previously.
Choice "a" is incorrect. Although Ace lacked express authority, a court might find that he had apparent authority since Bolt had held Ace out as its agent previously.
Choice "d" is incorrect. A principal is not an insurer of an agent's acts. A principal is liable only when the agent acts with authority.
