CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent
Meera appointed Rohan as her agent for a fixed term of two years under an express contract. After six months she revoked his authority without any sufficient cause and without any notice. Under the Indian Contract Act, 1872, what is the position?
Meera must compensate Rohan. Where an express or implied contract says the agency will continue for a period, a principal who revokes it without sufficient cause must make compensation to the agent for that revocation.
- AMeera must compensate Rohan for the revocation made without sufficient causeCorrect
- BRohan must compensate Meera for the wrongful revocation
- CNo compensation is payable because a principal can always revoke freely
- DThe revocation is void and the agency continues automatically for the full term
Explanation
Where there is an express or implied contract that the agency should continue for a period of time, the principal must compensate the agent for a revocation without sufficient cause. The agent would owe compensation to the principal only if he had renounced without sufficient cause. The revocation is effective, but it carries compensation liability.
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