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Difficulty: HardLaw of Agency: Rights, Duties, Liabilities, and Termination

Alhaji Audu owes Tunde 2,000,0002,000,000. To secure the debt, Alhaji Audu executes an agreement appointing Tunde as his agent to sell a commercial warehouse and recover the debt from the sale proceeds. Before Tunde finds a buyer, Alhaji Audu issues a formal notice revoking Tunde's authority. Under the law of agency, what is the legal position regarding this revocation?

  1. The revocation is legally ineffective because an agency coupled with an interest is irrevocable by the principal without the agent's consent.Answer
  2. B
    The agency is validly terminated because a principal maintains an absolute right to revoke an agent's authority at any point before performance.
  3. C
    The revocation automatically converts the agency into a contract of sale, making Tunde the legal owner of the warehouse.
  4. D
    The agency relationship is instantly discharged by frustration, extinguishing Alhaji Audu's debt obligation to Tunde.

Answer

The revocation is legally ineffective because an agency coupled with an interest is irrevocable by the principal without the agent's consent.
Under the law of agency, an agency coupled with an interest occurs when authority is granted to an agent for the purpose of securing a debt or valuable consideration owed to the agent. Such an agency is irrevocable by the principal without the agent's consent. Therefore, the notice revoking authority is legally ineffective.

Step-by-Step Solution

1
Identify the nature of the agency created between the principal and the agent.
The agency was created specifically to secure a debt owed to the agent, constituting an 'agency coupled with an interest'.
When authority is granted to secure an interest or value held by the agent, special termination rules apply.
2
Apply the legal rules governing termination of an agency coupled with an interest.
Under commercial law, such an agency cannot be unilaterally revoked by the principal to the detriment of the agent's security.
Unilateral revocation would defeat the security interest created for the agent's protection.
3
Evaluate the legal effect of the principal's notice of revocation.
The notice of revocation is invalid and without legal effect; the agent retains the authority to sell the warehouse and recover the debt.
An agency coupled with an interest is irrevocable without the mutual consent of the agent.

Key Concept

Termination of Agency: Agency Coupled with an Interest
Estimated Time:1m 30s
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Topics

Law of Agency: Rights, Duties, Liabilities, and Termination

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