An agent who exceeds the authority granted by the principal:
Question & Answer
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Automatically terminates the agency
Agency does not automatically terminate when an agent exceeds authority. The agency relationship continues unless properly terminated by agreement, expiration, or operation of law. Unauthorized acts create liability issues rather than termination of the agency itself.
May be personally liable
Is protected by the principal
The principal is not obligated to protect an agent who exceeds their authority. In fact, the principal may seek indemnification from the agent for any losses resulting from unauthorized acts. Protection only exists when the agent acts within their authorized scope.
Creates a new agency
An agent who exceeds authority does not create a new agency. They simply act outside their existing authority. A new agency would require mutual consent and agreement between principal and agent, which doesn't occur through unauthorized acts.
Why is this correct?
When an agent acts beyond their authority, they may become personally liable for damages. The principal is not bound by unauthorized acts unless they ratify them. This is a fundamental principle of agency law that protects principals from unintended obligations while holding agents accountable for exceeding their authorized scope.
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