The revocation of agent's authority by the principal is one of the modes of the termination of agency. The revocation of agent's authority can be made by the principal subject to the following rules :-
(1) Revocation may be express or implied (Section 207)
According to Section 207, revocation of agency may be either expressed or implied in the conduct of the principal. For example, A empowers B to let A’s house. Afterwards, A lets it himself. This is an implied revocation of B’s authority.
It is a trite that a contract of Vakalatnama can be withdrawn by the client at any time. In R.D. Saxena v. Balaram Prasad Sharma A.I.R. 2000 S.C. 2912, the Apex Court said that the right of the litigant was to be read as the corresponding counterpart of the professional duty of the advocate. Therefore, the refusal to return the files to the client when he demanded the same, amounted to misconduct under Section 35 of the Advocates Act, 1961. Reiterating these observations in N.I.A. Co. Ltd. v. A.K. Saxena A.I.R. 2004 S.C. 311, the Apex Court ruled that the right of the client to receive back the papers would hold good for every case. Relying on these observations the Karnataka High Court in C.V. Sudhendra v. Divine Light School for Blinds A.I.R. 209 Kar. 5, said that the client losing confidence and faith in the Advocate could terminate Vakalatnama and such return of files.
For example, a father after executing a power of attorney in favors of his son, sells the property the subject matter of the deed, himself. Again, in a suit for partition the defendants executed a General Power of Attorney in favor of one Umesh Chander and got it registered. However, the defendants signed a compromise petition, which amounted to implied revocation of power of attorney. Upholding the act of the defendants the Supreme Court in Deb Ratan Biswas v. Anand Moyi Devi A.I.R. 2011 S.C. 1653, held that execution of Power of Attorney did not denude the principal of his power to act independently. The Court ruled that the principal was not required to consult his attorney before signing the compromise petition. Likewise, an agency for the management of immovable property would stand terminated when the property is transferred.
Secondly, reasonable notice is a mandatory requirement under Section 206 for termination of agency.
(2) No revocation of agency when agent has interest in the subject-matter (Section 202)
According to Section 202 :-
"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."
When the authority of an agent is “coupled with interest”, the authority conferred on the agent cannot be revoked to the prejudice of the agent’s interest. This is, however, subject to an express contract to the contrary. The following illustrations attached to Section 202 explain the provision.
Illustrations
(a) A gives authority to B to sell A’s 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.
(b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price, the amount of his own
advances. A cannot revoke his authority, nor is it terminated by his insanity or death.
Whether the agency can be revoked by the principal or not depends on the fact whether agency creates an interest in favour of the agent or not. If no such interest has, in fact, been created, mere assertion in the contract that the power of attorney is irrevocable is not enough. Even if it has been described as irrevocable, the agency may still be revoked, if no interest has been created in favour of the agent.
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.
(3) Revocation possible before the authority has been exercised (Section 203)
According to Section 203, the principal may, save as otherwise provided by the last preceding Section (i.e., Section 202) revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal. It means that when the agent has already exercised the authority conferred upon him by the principal, the revocation of the same is not possible.
According to Section 203, the principal may, save as otherwise provided by the last preceding Section (i.e., Section 202) revoke the authority given.
In Subhadra v. M. Narasimha Murthy A.I.R. 2012 Kar. 19., the plaintiff sold the suit property to the 1st defendant by executing a power of attorney based, on which, the 1st defendant executed a sale deed in favour of the 2nd defendant. The plaintiff had received Rs. 29,000/- as consideration from the 1st defendant. The plaintiff had cancelled the power of attorney without paying back the consideration of Rs. 29,000/- received by him.
However, before the agency is terminated on ground of commission of fraud by concealing facts resulting in loss of faith in him, the agent must be afforded an opportunity of hearing.
Revocation when authority has been partly exercised (Section 204)
When the authority has been partly exercised by the agent, there can be no revocation of agency as regards such acts and obligations as arise from the acts already done. The provision in this regard is contained in Section 204, which is as under:
“204. Revocation where authority has been partly exercised. 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.
Illustrations
(a) A authorizes B to buy 1,000 bales of cotton on account of A and to pay for it out of A’s money remaining in B’s hands. B buys 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B’s authority so far as regards payment for the cotton.
(b) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A’s money remaining in B's hands. B buys 1,000 bales of cotton in A’s name, and so as not to render himself personally liable for the price. A can revoke B’s authority to pay for the cotton.”
(4) Principal to compensate, if there is premature revocation without justification (Section 205)
When the agency has been created for a fixed time by an express or implied contract, its premature revocation by the principal will make him liable towards the agent, unless the revocation has been made with any sufficient cause. Section 205 makes the following provision in this regard
“205. Compensation for revocation by principal, or renunciation by agent.-Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.”
If the agency is for a fixed term, although with the possibility of fresh appointment after the expiry of the term, it automatically terminates on the expiry of the said term. Such agency cannot be said to be irrevocable.
(5) Principal should give reasonable notice of revocation (Section 206)
According to Section 206, when the principal having justification to do so revokes the authority, he must give reasonable notice of such revocation to the agent, otherwise he can be made liable to make good any damage which may be caused to the agent.
In re M/s. Om Prakash Pariwal A.I.R. 1988 Cal. 143, the petitioners were appointed the Storing Agent of Food Corporation of India. Pursuant to the contract, the storing agent invested huge sums of money, engaged a number of workmen and started an infrastructure of business, and changed his pattern of life financially and in many other ways. The contract of agency was terminated by the F.C.I. without giving any reasons or notice. It was held that termination of agency without giving to the storing agent a notice asking him to show cause and opportunity of hearing before the termination, was illegal. Moreover, a clause in the agreement enabling the F.C.I. to terminate the agency like that was itself unreasonable and, therefore, not valid.
(6) Termination of agency terminates sub-agency also (Section 210)
According to Section 210, the termination of the authority of an agent causes the termination of the authority of all sub-agents appointed by him.
(7) Agent’s duty on termination of agency by principal's death or insanity (Section 209)
When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.
(8) Time from which the termination of agent’s authority becomes effective (Section 208)
According to Section 208, “the termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, so far as regards third persons, before it becomes known to them.”
The termination of the agency does not become effective immediately. It takes effect-
(i) against the agent, when the fact of termination becomes known to him; and
(ii) against third persons, when it becomes known to them.
Illustrations
(a) A directs B to sell goods for him and agrees to give B five per cent commission on the price fetched by the goods. A, afterwards, by a letter, revokes B's authority. B, after the letter is sent, but before he receives it, sells the goods for 100 rupees. The sale is binding on A, and B is entitled to five rupees as his commission.
(b) A, at Madras, by letter, directs B to sell for him some cotton lying in a warehouse in Bombay, and afterwards by letter, revokes his authority to sell, and directs B to send the cotton to Madras. B, after receiving the second letter, enters into a contract with C who knows of the first letter, but not of the second, for the sale to him of the cotton. C pays B the money, with which B absconds. C’s payment is good as against A.
(c) A directs B, his agent, to pay certain money to C. A dies, and D takes out probate to his will. B, after A’s death, but before hearing of it, pays the money to C. The payment is good as against D, the executor.
Section 208 as discussed above, clearly provides that termination of an agent's authority is not to take place unless communicated to him and will not affect the third party unless it
becomes known to him.
In Ram Asri v. Rakesh Chand A.I.R. 2008 P. & H. 194, the facts admitted were that one Mahant Jaram Dass executed the general power of attorney to deal with his immovable property on 10-6-1968 by registered deed registered at Anandpur and that it was cancelled by another deed registered at Ropar on 18-4-1977. Ram Gopal, the attorney of Jaram Dass, a son of the latter, sold the property by a sale deed executed on 7-7-1977. There was, however, not an iota of evidence to establish that the vandee, the defendants, had the knowledge of the cancellation of general power of attorney in favour of Ram Gopal. Upholding the validity of the sale executed by the attorney, the High Court of Punjab and Haryana ruled since the vendees never had notice of cancellation of power of attorney by virtue of Section 208 of the Contract Act, 1872, termination of agent's authority would have no impact upon validity of sale.
The Punjab and Haryana High Court referred to Madras High Court’s decision in Khathoom Bivi Ammal v. Arulappa Nadar A.I.R. 1970 Mad. 76, wherein the Court dealing with a similar issue observed that Illustration (b) attached to Section 208 of the Contract Act, 1872 was apposite to the facts of the case. The Madras High Court reiterated and relied upon the decision in Trueman v. Loder (1840) 11 Ad & EI 589, where it was observed:
“The policy of the law, apparently in the interests of trade and commerce, is that the agent’s action should bind the principal, even though the principal might have cancelled the agent's authority unless the third persons with whom the agent enters into contracts knew of the termination of the agency.”
In Trueman v. Loder case, A traded with B’s agent with B’s authority. All parties with whom A made contracts in that business were held to have a right to hold B liable to them until B gives notice to the world that A's authority is revoked; and it makes no difference if in a particular case the agent intended to keep the contract on his own account. The Court observed:
“It is argued on behalf of the appellant that it is very unreasonable to expect the first defendant should inform the whole world that she had cancelled the power of attorney given to the fourth defendant, and that she cannot be expected to approach everybody with whom the fourth defendant was likely to inter into contract and inform them of the cancellation. I do not think that such consideration have any relevance in the face of the clear words of the Section.”
It is thus a trite law that so far as third parties are concerned, the law is that the termination of a contract of agency takes effect only from the time the third party obtains knowledge of it and that the third party is not affected unless he has knowledge of such termination.
Renunciation of agency by the agent
As the principal can revoke the agent’s authority, so also the agent can renounce the agency. Section 206 requires that the agent must give his principal reasonable notice of renunciation otherwise he will be liable to make good any damage caused to the principal for want of such notice. Section 207 further mentions that like revocation, the renunciation may also be express or may be implied in the conduct of the agent. Where, however, there is a contract that the agency should be continued for any fixed period, and the agent makes renunciation, without any sufficient cause, prior to the expiry of the stipulated time, he must compensate the principal for any loss caused to him by the premature renunciation.
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