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  • Read the given passage very carefully and answer the question. An agency arrangement is a form of general contract. As such, except where the agency is irrevocable, an ag

Read the given passage very carefully and answer the question.

An agency arrangement is a form of general contract. As such, except where the agency is irrevocable, an agency can terminate in the same way as a contract is discharged. Only the act or consent of the parties to the agency or the enforcement of the law may terminate the relationship between the principal and the agent. “In the absence of anything to prove its termination, an agency, when proven to have existed, will be presumed to have continued, unless such a length of time has elapsed as destroys the presumption.” When an entity is dissolved, the obligation of the agent to work on behalf of the principal comes to an end. A government law or instrument may stipulate the timeline for the termination of an entity.

In such a case, if the instrument states in clear and unambiguous terms that after the expiry of the time stated in the instrument, an agency shall terminate without intervention on the part of the principal or administrator, the agency shall, in effect, terminate. If the parties maintain their partnership as principal and agent after the expiry of the duration given in the contract, a substantiated assumption is posed that their relationship is regulated by the original contract and that the contract is extended for a similar term. For example, where the parties entered into a contract for a year and proceeded to behave after one year under the contractual conditions, the court would conclude that the parties genuinely wanted to hold the contract alive for a period of time.

On the other hand, if no reasonable deadline has been set by the parties for the expiration of the contract, the contract is assumed to have been terminated after a reasonable period of time. “The nature of the act specifically authorised, the formality of the authorisation, the likelihood of changes in the purposes of the principal, and other factors shall determine what constitutes a reasonable period of time during which the authority continues.” In comparison, the burden of proving an agency’s termination or revocation lies with the agency.

Question

‘C’ appoints ‘G’ to act as his agent for two weeks. ‘G’ agrees to act without payment. ‘C’ instructs ‘G’ to collect rent each Friday morning from his tenants and pay the rent into the bank next door. In the second week, ‘G’ collects the rent but fails to bank it. On the way home he leaves it on the bus and it is never recovered. Can ‘C’ take action G for breach of his agency duties?

 

Option: 1

No, ‘C’ has provided no consideration and therefore there is no agency agreement. 

 


Option: 2

No, ‘G’ is a gratuitous agent and has no duty to follow instructions.

 


Option: 3

Yes, even through ‘G’ is a gratuitous agent if he must do in accordance with instructions set out by the principal.

 


Option: 4

Yes, provided he pays ‘G’ for being an agent.

 


Answers (1)

best_answer

An unpaid (gratuitous) agent will have no duty to act as no consideration has been provided by the principal, but if he does act, he must do so in accordance with the instructions set out by the principal.

In case, C has provided no consideration. But Consideration is not essential to create an agency agreement. So, a valid agency is created.

Even though G is a gratuitous agent, he must do in accordance with the instructions set out by the principal. So, C can take action against G for breach of his agency duties.

 

Posted by

Gautam harsolia

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