Question

Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Harold ends up with the lot. She just wants her money. Which of the following is true regarding whether Alice is personally bound on the contract with Sarah?

A. Alice is not personally bound because she was acting on behalf of Harold.

B. Alice is personally bound unless she can establish that Sarah would not have sold her the lot if she had known that Harold was involved.

C. Alice is personally bound unless she can establish that Harold has the funds with which to pay Sarah.

D. Alice is not personally bound unless Harold has legally filed for bankruptcy.

E. Alice is personally bound.

Answer

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