ExpertHard1 markMultiple Choice
CPA · Question 10 · Area II: Business Law
A principal terminates an agent's actual authority. To terminate the agent's apparent authority with respect to third parties who have previously dealt with the agent, what action is REQUIRED?
A principal terminates an agent's actual authority. To terminate the agent's apparent authority with respect to third parties who have previously dealt with the agent, what action is REQUIRED?
Answer options:
A.
Actual notice must be given to the third parties.
B.
Constructive notice (e.g., publication in a newspaper) is sufficient.
C.
No notice is required if the termination was for cause.
D.
Filing a statement of termination with the Secretary of State.
How to approach this question
Distinguish between 'old customers' (Actual Notice) and 'potential new customers' (Constructive Notice).
Full Answer
A.Actual notice must be given to the third parties.✓ Correct
When an agency relationship is terminated, the principal must give actual notice to third parties who have previously dealt with the agent to terminate apparent authority. Constructive notice is sufficient for others who knew of the agency but hadn't dealt with the agent.
Common mistakes
Thinking constructive notice covers everyone.
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