Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized. a. Trueb. False

True.

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.

Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized. This simply means that, the principal would be held responsible for the losses, legal claims and damages incurred by the agent, whether or not the agent's actions were authorized or unauthorized by the principal.

Hence, a principal 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.