What is a potential consequence of an agent acting outside their authority?

An agent acting outside their authority can lead to significant legal and financial repercussions for the principal, particularly in terms of liability. When an agent exceeds their granted powers, such actions can bind the principal to contracts or obligations that they did not intend to enter into. This means that even if the agent acted without explicit permission, the principal may still be held legally responsible for the agent’s actions if those actions can be deemed to be within the scope of the agent's role or if the principal fails to properly notify third parties of the limitations of the agent’s authority.

For example, if an agent misrepresents their authority to negotiate a contract and the other party relies on that representation, the principal could be obligated to honor the contract despite the agent’s lack of authority. This principle underscores the importance of well-defined authority in agency relationships, where both agents and principals must understand the limits of the agent's powers.

The other scenarios listed do not accurately reflect the real-world implications of an agent acting outside their authority. The termination of the agency may occur, but it is a reaction rather than a consequence of the initial action. Increased investment does not relate to the misbehavior of the agent and suggests an unrelated financial outcome. Lastly, the idea that there would be