18 DAYS ACCOUNTS & BUSINESS LAW CHALLNEGE
DATE: 07.09.2024 PAPER: 2 - BUSINESS LAW
Question 1: (5 marks)
Bhupendra borrowed a sum of Rs. 3 lacs from Atul. Bhupendra appointed Atul as his agent
to sell his land and authorized him to appropriate the amount of loan out of the sale
proceeds. Afterward, Bhupendra revoked the agency. Decide under the provisions of the
Indian Contract Act, 1872 whether the revocation of the said agency by Bhupendra is lawful.
Answer 1:
Provisions of the Act:
According to Section 202 of the Indian Contract Act, 1872 an agency becomes irrevocable
where the agent has himself an interest in the property which forms the subject-matter of
the agency, and such an agency cannot, in the absence of an express provision in the
contract, be terminated to the prejudice of such interest.
Analysis of the case:
In the instant case, the rule of agency coupled with interest applies and does not come to an
end even on death, insanity or the insolvency of the principal. Thus, when Bhupendra
appointed Atul as his agent to sell his land and authorized him to appropriate the amount of
loan out of the sale proceeds, interest was created in favor of Atul and the said agency is not
revocable.
Conclusions:
The revocation of agency by Bhupendra is not lawful, as interest was created in favor of Atul
and the said agency is not revocable.
Question 2: (5 marks)
Mr. X owes Mr. Y Rs.50,000. He (Mr. X) afterwards appoints Mr. Y as his agent to sell his Flat
at Bangalore and after paying himself (i.e., Mr. Y) what is due to him, hand over the balance
to Mr. X. Examine, as per the provisions of the Indian Contract Act, 1872, can Mr. X revoke
his authority delegated to Mr. Y?
Answer 2:
Provisions of the Act:
According to Section 202 of the Indian Contract Act, 1872 an agency becomes irrevocable
where the agent has himself an interest in the property which forms the subject-matter of
the agency, and such an agency cannot, in the absence of an express provision in the
contract, be terminated to the prejudice of such interest.
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Analysis & conclusion:
In the given question, Mr. X owed to Mr. Y Rs. 50,000. When Mr. X appointed Mr. Y as his
agent to sell his Flat and authorized him to appropriate the amount due to Mr. X out of the
sale proceeds, interest was created in favor of Mr. Y and the said agency is not revocable.
Thus, Mr. X cannot revoke his authority delegated to Mr. Y.
Alternate answer:
Provisions of the Act:
An agency may be terminated by the principal revoking the authority of the agent. Principal
may revoke the authority given to his agent at any time before the authority has been
exercised so as to bind the principal [Section 203].
However, 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 for acts already
done in the agency. [Section 204]
When the principal, having justification to do so, revokes the authority, he must give
reasonable notice of such revocation to the agent, otherwise, he would be liable to pay
compensation for any damage caused to the agent (Section 206).
Analysis & conclusion:
Hence, Mr. X can revoke his authority delegated to Mr. Y if Mr. Y has not exercised any
authority towards the act authorized by Mr. X and no obligation arises out of it.
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