Irrevocable Agency

When an agency cannot be terminated or put an end to, it is said to be an irrevocable agency. An agency is irrevocable in the following cases:

1. Where the agency is coupled with interest

An agency is said to be coupled with interest when it is created for securing some benefit to the agent over and above his remuneration as agent. Where, for example, a creditor is employed as an agent to collect rents due to the principal for adjusting the amount towards his debt, the authority of the agent is coupled with interest and it is irrevocable during the subsistence of the interest. Sec. 202 of the Contract Act provides to this effect as follows. Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.

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(a) P gives authority to A to sell P’s land. and to pay himself, out of the proceeds, the
debt due to him from P. P cannot revoke this authority, nor can it be terminated by his insanity or death.

(b) P consigns 1,000 bales of cotton to A who has made advances to him on such
cotton. and desires A to sell the cotton and to repay himself, out of the price, the
amount of his own advances. P cannot revoke this authority, nor is it terminated by
his insanity or death.

The above rule applies only if the agency is created for the protection of the interest of the agent. It does not apply where the interest arises after the creation of the agency. It is important that the agency is created with the object of securing a benefit to the agent, and it is not sufficient that the agency secures a benefit to the agent incidentally.

Example. A was entrusted by P with certain wheat to be sold on his (P’s) behalf. Subsequently A advanced a certain sum of money to P which P failed to pay. P gave orders that the wheat was not to be sold. A nevertheless sold it to secure his advance. In an action against A, A pleaded that the agency, being coupled with interest, was irrevocable. The Court, however held that this was an improper application of the rule, and A could not sell the wheat. This is because the agency is not coupled with interest [Smart v. Sandars, (1848) 5 C.B. 895]

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2. Where the agent has incurred a personal liability

Where an agent incurs a personal liability, the agency becomes irrevocable. The principal cannot, in such a case, revoke the agency leaving the agent exposed to the risk or liability he has already incurred.

3. Where the agent has partly exercised the authority

The principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency (Sec. 204).

Example. P authorises A to buy 1,000 bales of cotton on account of P and to pay for it out of P’s money remaining in A’s hands. A buys 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. P cannot revoke A’s authority so far as regards payment for the cotton.

In Bhagwanbhai Karamanbhai v. Arogyanagar Co-op. Hsg. Socy. Ltd. A.I.R. 2003 Guj. 294, irrevocable power of attorney was executed by all land owners for sale of land. Landowners had also parted with their power in favour of power of attorney holder. The Gujarat High Court held that on the death of one of the landowners, there was no need for power of attorney holder to obtain consent from heirs and legal representatives of deceased landowners, because there was no express contract for the termination of agency.

Likewise in Birat Chandra Dagara v. Taurian Exim Pvt. Ltd. A.I.R. 2005 Ori. 147, there was an intention to transfer leasehold area in favour of power of attorney holder. Interest was created in favour of power of attorney holder in respect of such property. The Orissa High Court held that Section 202 was attracted and such agency could not be terminated, in the absence of any express contract, to the prejudice of such interest.

Likewise, in Ranganayakamma v. K.S. Prakash A.I.R. 2005 Kant. 426 the Karnataka High Court held that where member of joint family with full knowledge had agreed to release and relinquish her claim to share in joint family properties, and had empowered her brother as power of attorney holder, with authority to execute the partition deed, in express terms, in the manner the holder deems fit. Neither in pleading nor in her deposition there was mention of any other person, in whom she had released and relinquished her right over property. Contention that there was conflict of interest between agent and principal was held not tenable. Section 215 did not apply. It was held that partition deed executed by power of attorney holder releasing and relinquishing properties in his favour was not illegal.

In Ishwarappa v. Arun Kumar A.I.R. 2004 Kant. 417 there was execution of power of attorney to look after construction work. Terms of power of attorney had not specifically authorized agent to incur the loan liabilities in his personal capacity for the purpose of construction of building. Property was not offered as a security for pecuniary liabilities incurred by agent at the time of creation of agency. As power of attorney could not be said to be coupled with interest, the Karnataka High Court held that the agent could not take plea that because of personal liabilities incurred, agency became irrevocable unless accounts were settled and liabilities were discharged. Revocation of power of attorney was held proper. Moreover, personal liabilities had also not been proved.

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