If a principal terminates an agency without giving notice of the termination to third persons, the agent may retain the power to make contracts that will bind the principal and third persons.

Question

Quizplus · Accepted Answer

This is because third parties are not aware of the termination of agency and may continue to deal with the agent in good faith. As a result, the principal is still bound by any contracts that the agent enters into on their behalf before the termination is made known to third parties.

If a Principal Terminates an Agency Without Giving Notice of the Termination