Question

James Franklin listed his home with Freda Payne Realty.The listing contract provided that Franklin's home could not be sold for less than $100,000.Freda entered into a contract for Franklin to sell his home for $95,000.Which of the following statements is true?​

A)​ Although Freda did not have actual authority, she had apparent authority and the contract is binding on Franklin.
B)​ Freda did not have actual or apparent authority to enter into the contract and it is not binding on Franklin.
C) Freda had implied authority to enter into the contract and it is binding on Franklin.
D) The buyer can enforce the contract against Franklin using promissory estoppel.

Answer 1

A)​ Although Freda did not have actual authority, she had apparent authority and the contract is binding on Franklin.

Step-by-step explanation:

In contract and agency law, apparent authority is binding, which means that an agent acting with apparent authority can sign a contract and the principal must perform. The buyer in this case can sue James if he decides not to sell his house since it was listed with Freda.

But that doesn't mean that James will lose money necessarily, since Freda breached the contract with James and he can sue in order to recover the losses suffered due to the lower price.

Apparent authority exists when the principal's actions would make any reasonable person belief that he/she entitled an agent with the power to negotiate in their behalf.

Answer 2

Freda did not have actual or apparent authority to enter into the contract and it is not binding on Franklin.

Step-by-step explanation:

When an agent is contracted to make a deal on behalf of a principal, he has an obligation to only make a deal based on the principal's instructions.

James Franklin is using the services of Freda Payne Realty. He stated that his property should not be sold for less than $100,000.

If Freda enters into a contract to sell the property for $95,000, it is in contravention with instruction from Franklin.

So Freda did not have the authority to enter the deal on behalf of Franklin. The deal is not binding on Franklin.