Question

Ada is the maker of a note, on which Bart is secondarily liable. Credit Instruments Company is the current holder of the note. Bart will be obligated to pay the note if a. Ada defaults on the note. b. Credit Instruments breaches a transfer warranty. c. Credit Instruments presents the note for payment. d. Credit Instruments negotiates the note to Delta Collection Agency, a third party.

Answer 1

Answer:

a. Ada defaults on the note.

Explanation:

An agency can be defined as a mutual relationship existing between two parties, wherein a principal authorizes the agent to act as the principal's representative or on his behalf (fiduciary role) in dealing with third parties.

The parties entering into a contractual agreement are obligated to terminate an agency relationship by placing into the agreement a time period specifying the termination. Thus, when that time elapses or expires, the agency between the parties involved ends. Furthermore, the parties involved may specify the particular purpose for which the agency is established. Once that purpose is achieved, the agency is terminated or ends.

This ultimately implies that, the legal entity or secondary liability (trustee or licensee) would be held responsible for the losses, legal claims and damages incurred by its partner in an agency, whether or not the agent's actions were authorized or unauthorized by the principal.

In this scenario, Ada is the maker of a note, on which Bart is secondarily liable. Also, the current holder of the note is Credit Instruments Company.

Since Bart is secondarily liable to Ada, it will be obligated to pay for any of the notes if Ada defaults on the them.

Hence, a trustee is liable for acts or contracts entered into by an agent when he or she gives an agent either actual authority (power of attorney) or apparent authority.