When an agent's authority is terminated by mutual agreement, what is the impact on the agent's actual and apparent authority?
A) The actual authority continues until the third party is notified of termination, but the apparent authority ceases.
B) Both the actual authority and the apparent authority continue until the third party is notified of termination.
C) Both the actual authority and the apparent authority immediately cease.
D) The actual authority ceases, but the apparent authority continues until the third party is notified of termination.
E) Both the actual authority and the apparent authority continue, because an agent's authority cannot be terminated by mutual agreement.

Question

Quizplus · Accepted Answer

The actual authority of an agent ceases when the agency relationship is terminated by mutual agreement, but the apparent authority continues until the third party with whom the agent interacts is notified of the termination. This is because third parties might still reasonably believe the agent has the authority to act on behalf of the principal until they are informed otherwise.

When an Agent's Authority Is Terminated by Mutual Agreement, What