Which statement about agency rules is correct?

Which statement about agency rules is correct?

• A. An agent cannot legally bind the principal
• B. All actions must have express authority
• C. A principal does not need contractual capacity
• D. An agent has no duty of loyalty to the client

Answer: (C)

A principal does not need contractual capacity for an agency relationship to be established, which makes this statement correct. This means that even if a principal is incapacitated or lacks the legal ability to enter into a contract on their own, they can still have an agent represent them. The agent's authority arises from the principal's consent, which can be given even if the principal cannot fully engage in legal contracts. In contrast, the other statements are not accurate in the context of agency rules. An agent typically can legally bind the principal through their actions within the scope of their authority. Express authority, while significant, is not the only means by which authority can be granted; implied authority can also exist. Lastly, an agent has a duty of loyalty to their principal, which includes acting in the best interest of the principal and avoiding conflicts of interest.

A principal does not need contractual capacity for an agency relationship to be established, which makes this statement correct. This means that even if a principal is incapacitated or lacks the legal ability to enter into a contract on their own, they can still have an agent represent them. The agent's authority arises from the principal's consent, which can be given even if the principal cannot fully engage in legal contracts.

In contrast, the other statements are not accurate in the context of agency rules. An agent typically can legally bind the principal through their actions within the scope of their authority. Express authority, while significant, is not the only means by which authority can be granted; implied authority can also exist. Lastly, an agent has a duty of loyalty to their principal, which includes acting in the best interest of the principal and avoiding conflicts of interest.