Professional Documents
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PATNA
PROJECT ON
IRREVOCABLE AGENCY
SUBMITTED TO:
SUBMITTED BY:
MR. VIJAY KUMAR VIMAL
PRIYA JHA
ACKNOWLEDGEMENT
LIKE THIS .
THANKYOU ALL
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TABLE OF CONTENTS
Page
TITLE Number
DECLARATION
INTRODUCTION
BIBLIOGRAPHY
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I hereby declare that the work reported in the BBA LL.B (Hons.) Project Report entitled
is an authentic record of my work carried out under the supervision of Mr. Vijay Kumar
Vimal . I have not submitted this work elsewhere for any other degree or diploma. I am
PRIYA JHA
Date
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INTRODUCTION
In addition to the agency coupled with an interest, that is where the agent's interest is in the
thing itself, in addition to the interest he has in the execution of the power vested in him,
there is another kind of agency where the principal may not revoke the authority that the
agent has in the agency, that is, when the revocation of the authority would involve the agent
in liability to third persons. Such an agency is said to exist where the agent has been given
certain funds for the purpose of paying the principal's debts and has himself promised the
creditors to pay.
The statement in the authority that the agency is an irrevocable one does not prevent the
person giving such authority from revoking the power even though the express terms of the
contract positively state that it is not to be revoked.
The Illinois Court in the case of Walker vs. Denison, after quoting from the rule, that the
agency is irrevocable in the case of a power coupled with an interest, and in the case of an
agency given for a valuable consideration, shows how this case differs from such an agency,
in that the party claiming such an interest here is shown only to have an interest in that which
is produced by the exercise of the power, and no interest in the thing itself.
The Court further says that the case, "does not fall within the other exception - of an
instrument having been given for a valuable consideration or as a part of a security." The
power of attorney itself was not given for any such independent purpose. All that can be said
in that regard is that the particular clause in the instrument against revocation might be
beneficial to the agent appointed, in the way of profit derivable from the exercise of the
agency, and the securing compensation for any service and expenditure therein. We do not
consider that any such consideration or security respecting the mere benefit to the agent from
the exercising of the power, should at least under the circumstances here, debar the principal
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from revoking the power. For any legal injury the agent may have sustained from the
revocation, he may have his remedy upon the covenant not to revoke.
Agency relationships exist where one party has authority to act on behalf of another party.
Agency relationships are a significant concept in the law and so a basic understanding of the
terms and concepts governing their existence is important.
Agency can be a complex legal concept with implications for a variety of day-to-day
activities. Agency relationships can even be formed unintentionally. Agency law developed
over centuries as a way to provide fairness to daily activities, particularly business activities,
and so the laws of agency do not always come with the obvious formalities that many people
expect when dealing with matters of great legal significance
To do the detailed study on the given topic. No stone has been left unturned to make this
project a worthy task. To let it not go a futile exercise every possible step has been taken.
It is being believed by the researcher that it will open a door of success in making many
such academic researches and even better than it, when needed. It would quench the thirst
for academic excellence and dealing with such wrong in real life, if continued. Besides
this it will also fulfill the desire of the researcher to contribute services to the society.
SOURCES OF DATA:
1. Books
2. Websites
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3. The third party: the person with whom the agent interacts.
6. Superior and subordinate agents: exist when there is a hierarchy among the agents
serving one principal.
8. Disclosed principal: the third party knows that the agent is acting on behalf of a
principal and who the principal is.
9. Undisclosed principal: the third party does not know that the agent is acting on behalf
of a principal.
10. Unidentified principal: the third party knows that the agent is acting on behalf of a
principal, but does not know who the principal is.
11. Gratuitous agency: agency without compensation. Unlike a contract, agency does not
require consideration, compensation, or mutuality.
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Apparent authority exists when a third party reasonably believes that the agent has authority
to act on behalf of the principal based upon a manifestation of the principal.
Inherent authority exists when a principal gives someone a position, job, title, or role with
which there is some sort of inherit authority associated. This is often considered to be a type
of apparent authority1.
Restitution
If one party gives a benefit where he thinks there is an agency, and the principal accepts that
benefit, then the principal has an obligation to pay for the benefit. This will not, however,
make an invalid contract valid. It simply requires the party retaining the benefit to pay for the
value of the benefit.
Estoppel
Whenever the facts and circumstances are such that it would be equitable to impose liability
based upon the breach of some duty, then the courts may in their discretion use the doctrine
of estoppel to estop the principal from denying liability.
There is such a thing as passive manifestation. A principals failure to act may result in a
manifestation that gives apparent authority, thereby estopping the principal from denying an
agency.
Ratification
Ratification occurs where the principal ratifies an agency relationship after the fact. That is, if
a individual acted on behalf of the principal without the authority to do so, the principal can
ratify the agency relationship, even though it did not exist when the agent performed the
conduct in question.
3. The act must have been done without actual or apparent authority.
4. The act must have been done or purportedly done on behalf of the person who wants
to ratify.
5. The purported principal must manifest assent to the entire thing; there can be no
partial ratification.
6. The purported principal has to have knowledge of all the material facts.
Conduct will amount to ratification only when the conduct can be understood in no other
way. That is, the only reasonable interpretation is that the party meant to accept the benefits
and liabilities associated with the contract.
It is important to note that the purported principal must have existed at the time of the prior
act in order to ratify it. A purported principalsuch as a businessthat did not come into
existence until after the prior act cannot then ratify that act2.
Following the deregulation of the private sector in 1989, most landlords want to let properties
on assured shorthold tenancies. Agents often have to deal with paperwork and with problems
arising during the tenancy itself. This article looks at the legal rules governing the
relationship between landlords and agents and sets out the circumstances when agents are
liable for apparently wrongful acts.
The Law
The law relating to agency is a mixture of common law rules developed through case law,
with statute intervening in particular areas. For example, the Housing Act 1988 (or Housing
(Scotland) Act 1988) amended section 1 of the Protection from Eviction Act 1977 so that
section 1 of the PEA now applies to agents as well as landlords.
Where the tenancy or lease itself does not have to be granted by means of a deed (a written
instrument signed and delivered) the authority passing from landlord to agent does not itself
have to be created formally.
Tenancies or leases granted for three years or less, including periodic tenancies and all
shortholds do not have to be created by deed. . Under the Powers of Attorney Act 1971 if the
landlord wants the agent to deal with leases which have to be executed by deed, the agent and
the landlord must have entered into a deed themselves setting out that the agent has this
authority3.
3 Wilson, George; Shpall, Samuel (4 April 2012). "Action". Stanford Encyclopedia of Philosophy.
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Pre-tenancy agreement
In some cases the landlord will have specifically appointed the agent to undertake a range of
matters in relation to the tenancy in accordance with the standard terms of management
produced by the agency itself. Such agreements may be limited in scope with the agent's role
ending once the tenancy has been negotiated and entered into. If the relationship of agency
ends at that point then enquiries about repairs or any dispute are dealt with by the landlord.
The agent would then not have the authority to deal with such matters.
As long as the management agreement between the landlord and agent is clear then it should
be possible to determine the scope of the actual authority the agent has. This authority will
come from the written terms of the agreement, express words passing between the landlord
and the agent or it will be implied from the conduct of the parties 4. For example where the
landlord tells the agent to manage the property on a day to day basis, the agent will be
authorised to deal with things that arise within the usual scope of day to day
management. Authority could be extended to collecting rent, chasing arrears or dealing with
an advice agency in the event of a dispute about repairs. Implied authority would almost
certainly not extend to issuing legal proceedings for possession or the recovery of arrears
which might involve the landlord in expense.
4 ^ Ross, S. A. (1973). "The Economic Theory of Agency: The Principal's Problem". The American Economic
Review. 63 (2): 134139. JSTOR 1817064.
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Such steps would normally require actual authority being given expressly. If an agent did
issue proceedings without authority she/he would risk being sued by the landlord for any loss
incurred resulting from the proceedings. The tenant could also take action for breach of the
implied warranty that the agent did have the authority to act in this way.
Lack of Authority
If a tenancy is granted without authority the landlord will not be bound by the tenancy
agreement. If the agent has only been instructed to identify a suitable prospective tenant the
landlord will not be bound by the contract entered into by the agent. The tenant will in fact be
a trespasser. If the agent has maintained to the tenant that s/he does have the authority to grant
the tenancy where she/he does not, s/he will be deemed to have impliedly warranted that
authority exists and so the tenant can hold the agent liable for breach of warranty. 7 The tenant
could seek damages for the value of the tenancy lost. For example in an assured shorthold
case, the assessment of damages would start with the value of a right of occupation in the
premises for at least six months and any time the occupier might have expected to stay on
thereafter. General damages for distress and inconvenience could also be claimed.
The law recognises that the landlord can decide to ratify the agent's actions and if s/he does
so the agent's actions are deemed to be authorised. Ratification is not necessarily
straightforward, but the law will recognise it where it takes place expressly or impliedly.
Expressly where the landlord has communicated to the agent that the tenancy can go ahead.
Implied authority will arise if the landlord accepts rent or takes no steps to evict the tenant.9
There could be scope for arguing that although a landlord seems unwilling to proceed with
that particular tenancy, the agent did in fact (and in law) have apparent or ostensible authority
rather than actual authority5. That is " the authority of the agent as it appears to others ". This
type of case would normally arise where the tenant contacts the landlord who tells the tenant
that the agent is responsible for dealing with the tenancy on the landlord's behalf. This would
result in the landlord being bound by the acts of the agent. For example if the tenant contacts
the landlord about a burst pipe and is told to contact the agent, the landlord will be bound by
5 Bandura, A. (1999). "Social cognitive theory: An agentic perspective" (PDF). Asian Journal of Social Psychology. 2:
2141. doi:10.1111/1467-839X.00024. Retrieved 27 September2016.
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the acts of the agent and be liable for any expense incurred if the agent subsequently calls out
the plumber. The landlord cannot claim and is estopped from claiming that s/he is not bound
by the what the agent has done.
It does not matter in these circumstances whether the agent had actual authority to hire the
plumber. The landlord cannot lawfully refuse to pay the bill.
Negligence
However, if the agent undertakes the work her/himself and acts negligently, making the leak
worse so the tenant's home is flooded, then the agent will be liable for the negligent acts and
the loss which results from them. The agent could then be sued for damages by the tenant.
The landlord will still be liable for breach of contract under the tenancy agreement, however,
if the tenant can show that the landlord was responsible for the repair of the relevant pipe, for
example by pointing to a repairing clause in the tenancy agreement.
A considerable number of landlords rely heavily on the skill and expertise of the agents who
they appoint to act for them. The agent is under a duty to exercise reasonable care and skill in
carrying out their duties and in advising the landlord.
Case
In a recent case, Helling v Parker Breslin Estates [1994], the landlords wished to let a flat.
They were concerned to obtain vacant possession when the tenant left. The agents assured
them that possession was obtainable using a particular ground - that of saying the letting was
one to which Case 11 of Schedule 15 of the Rent Act 1977 applied.
Case 11 says that when a person who previously lived in a house and then let it could obtain
possession only where the court is satisfied that the dwelling is required as a residence for the
owner-occupier. Case 11 as a ground for possession was added to the standard tenancy
agreement. The owners subsequently decided that they were dissatisfied with the tenant but
because they did not wish to resume possession the Case 11 point was not argued when they
tried to obtain a possession order6. A suspended possession order was given - suspended on
6., Yolles, M., Fink, G., Iles, P., 2016, The Changing Organisation: Agency Theory in a Cross-cultural Context,
Cambridge: Cambridge University Press
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the terms that the tenants pay the arrears. When they sued the agents, the landlords argued,
and the court was satisfied that the landlords would never have let the flat if they had been
informed that possession could not be recovered at the end of the term.
The failure by the agent to explain the circumstances under which possession could have
been obtained under Case 11 amounted to a failure of skill in their duty of care to their client
landlord. The landlords could not sell the house and sued for diminution of value of the
property because it could not be sold with vacant possession.
Do not forget that if the tenant or their advisor requests the identity of the landlord and their
address under sections 1 and 2 of the Landlord and Tenant Act 1985 of any person demanding
or collecting rent, that this request has to be complied with. They can further request that the
identity of all of the directors and company secretary of a company under section 3 of the
same act. Local authorities have the power to prosecute under the act for failure to supply this
information.
Deposits
Disputes sometimes arise at the end of a tenancy where agents refuse to hand over deposits or
where the firm goes into liquidation. In nearly all cases the agent will have actual authority to
7 Robinson, E. H. (2011). "A Theory of Social Agentivity and its Integration into the Descriptive Ontology for Linguistic
and Cognitive Engineering". International Journal on Semantic Web and Information Systems. 7 (4): 62
86. doi:10.4018/ijswis.2011100103.
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take a deposit from a tenant at the beginning of the tenancy agreement and hold it as agent for
the landlord. If the agent simply refuses to return the deposit or disappears with the money
the landlord remains liable to return the deposit to the tenant.
Safety Regulations
The Gas Safety (Installations and Use) Regulations 1994 which largely came into force on 31
October, 1994 say that the landlords, suppliers and maintainers of gas appliances, meters,
pipework etc., are required to ensure that all gas appliances and fittings should conform to
these regulations.
Two issues emerge from these and similar regulations regarding the relationship between a
landlord and his agent. Firstly, an agent could be held to be negligent in not informing a
landlord of his obligations under these and similar regulations. An agent should take steps to
make this information available to landlords (e.g. a leaflet). Secondly, by virtue of the Health
and Safety at Work Act 1974, the agent also holds responsibility under the new gas safety
regulations.
8 Wilson, George; Shpall, Samuel (4 April 2012). "Action". Stanford Encyclopedia of Philosophy.
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Where the agent has himself an interest in the subject-matter of agency, the agency is said to
be coupled with interest. Such an agency is created with the object of protecting or securing
any interest of the agent.
So where a creditor is employed for valuable consideration as an agent to collect rents due to
the principal (debtor) for adjusting the amount towards his debt, the principal thereby confers
an interest on the agent and the authority cannot be revoked unilaterally during the
subsistence of the interest, in the absence of an express contract to the contrary.
It is important that the doctrine of agency coupled with interest applies only, if the authority
was intended for the protection of an interest of the agent existing at the time of the creation
of the agency and it is not sufficient that it does so incidentally. It, therefore, cannot apply
where the interest arises after the creation of the agency.
It must also be noted that an agency coupled with interest is not terminated even by the death,
insanity or insolvency of the principal.
A gives authority to B to sell As land and to pay himself, out of the proceeds, the debts due to
him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.
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Where the agent has, in pursuance of his authority, contracted a personal liability, the agency
becomes irrevocable and the principal cannot revoke the authority unilaterally. This is so
because the principal cannot be permitted to defeat rights already established.
Illustration:
A gives authority to B to pay As creditor C and places the necessary money in the hands of B
for that purpose. Thereupon B informs C that he has received money in his hands for
payment of his debt and that C may collect the same any time from him. A cannot revoke Bs
authority to pay to C as B has incurred a personal liability.
Where the agent has partly exercised his authority, it becomes irrevocable so far as regards
such acts and obligations as arise from acts already done in the agency.
A authorises B to buy 1,000 bales of cotton on account of A, and to pay for it out of As
money remaining in Bs hands. B buys 1.000 bales of cotton in As name and so as not to
render him personally liable for the price. A cannot revoke Bs authority so far as regards
buying the cotton but can revoke Bs authority to pay for the cotton.
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Where the agency came into existence by virtue of the expressed or implied authority
provided by the principal (see actual authority), the agency terminates upon the occurrence of
any of the following:
1. The agents death, or in the case of an artificial entity, the cessation of its existence.
2. Notice to the agent or to applicable third parties that the principal has died or ceased
to exist.
3. Notice to the agent or to applicable third parties that the principal has lost legal
capacity to have an agent.
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4. An agreement between the agent and the principal to terminate the agency.
Where apparent authority gives rise to an agency relationship, as discussed above, the agency
relationship ends when it is no longer reasonable for a third party to believe that the agent has
the authority to act on the principals behalf.
As I discussed, a principle can generally terminate an agency relationship at any time. After
all, the agent acts on behalf of the principal, as if the agent were the principal himself, and so
it makes sense that the principal should be able to terminate this arrangement whenever he
likes.
There are, however, situations in which a power given to an agent is irrevocable, even by the
principal. Once given, these powers cannot be reassumed.
At common law, the only situation that gave rise to irrevocable agencies was where the
agency power was given as a security or where the power was coupled with an interestboth
of which mean essentially the same thing. In this situation, the agent has essentially paid for
the right to serve as the agen9t.
So, for example, if John borrows $10,000 from Stacy and appoints Stacy as his agent to sell a
piece of property, the proceeds of which will repay Johns debt to Stacy, there exists an
agency power coupled with an interest.
9 Guo, K.J., Yolles, M., Fink, G., Iles, P., 2016, The Changing Organisation: Agency Theory in a Cross-cultural
Context, Cambridge: Cambridge University Press
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Generally, if the principal grants authority to be held for the benefit of the agent or a third
party in order to protect legal or equitable title or to secure performance of a duty other than
the duty owed by the principal incidental to the agency, the agency is irrevocable. This is not
too different than the common law approach, though specific statutory requirements will vary
from state to state. (Irrevocable agencies sometimes exist today in the context of publishing
contracts.)
Following the deregulation of the private sector in 1989, most landlords want to let properties
on assured shorthold tenancies. Agents often have to deal with paperwork and with problems
arising during the tenancy itself. This article looks at the legal rules governing the
relationship between landlords and agents and sets out the circumstances when agents are
liable for apparently wrongful acts.
The law relating to agency is a mixture of common law rules developed through case law,
with statute intervening in particular areas. For example, the Housing Act 1988 (or Housing
(Scotland) Act 1988) amended section 1 of the Protection from Eviction Act 1977 so that
section 1 of the PEA now applies to agents as well as landlords.
A genuine relationship of agency requires a principal, usually the landlord or owner of the
premises, to authorise an agent to act on the landlord's behalf. Authority to negotiate the
terms of the tenancy, prepare the paperwork, sign a contract and agree a lease all fall within
the relationship of agency.
Where the tenancy or lease itself does not have to be granted by means of a deed (a written
instrument signed and delivered) the authority passing from landlord to agent does not itself
have to be created formally.
Tenancies or leases granted for three years or less, including periodic tenancies and all
shortholds do not have to be created by deed . Under the Powers of Attorney Act 1971 if the
landlord wants the agent to deal with leases which have to be executed by deed, the agent and
the landlord must have entered into a deed themselves setting out that the agent has this
authority.
BIBLIOGRAPHY
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Books
1 Contracts 2 dr R K Bangia
2 Contract and specific relief dr Avtar singh
3 Contract law ( easi law series) dr avtar singh
websites
1 www.lawoctopus.com
2 www.lawteacher.net
3 www.lawquestinternational.com
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