Which of the following statements is true of the liability of an agent who is acting for a nonexistent or incompetent principal?
A) If the third person is unaware of the lack of capacity of a nonexistent or incompetent principal, the agent is not personally liable on the contract.
B) A minor is considered an incompetent principal, and an agent acting on behalf of such principals is personally liable on the contract.
C) If the principal is judged insane, the law imposes an apparent warranty by the agent that the principal has the capacity to be bound.
D) A person judged insane is considered to be nonexistent or incompetent and is personally liable for acts undertaken by an agent.

Question

Quizplus · Accepted Answer

A person who acts as an agent for a principal that is not in existence at the time of the act is personally liable on the contract. The same is true if the principal has been judged insane or is a minor. The law imposes an implied warranty by the agent that the principal has the capacity to be bound. However, if the third person is aware of the lack of capacity of the principal, the agent is protected.

Which of the Following Statements Is True of the Liability