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‘A’ gives authority to ‘B’ to sell A’s land on the condition to pay himself out of the proceeds, the…

Under Section 202 of the Indian Contract Act, 1872 ('Termination of agency, where agent has an interest in subject-matter'), where the agent has himself an interest in the…

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‘A’ gives authority to ‘B’ to sell A’s land on the condition to pay himself out of the proceeds, the debts due to him from A. But A died immediately on the next day leaving his only son ‘C’.

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Answer and explanation

Correct answer A

Under Section 202 of the Indian Contract Act, 1872 ('Termination of agency, where agent has an interest in subject-matter'), 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. Illustration (a) to Section 202 specifically states: '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.' Consequently, the agency survives 'A's death and 'A's legal heir 'C' is bound by it.

Option feedback

Option A

Correct. Under Section 202, Illustration (a) of the Indian Contract Act, 1872, because 'B' has an interest in the subject-matter of the agency (to pay himself the debts due to him from 'A' out of the sale proceeds), the agency is coupled with interest, survives 'A's death, and binds 'A's legal heir 'C'.

Option B

Section 201 sets the ordinary rule. Here section 202 preserves B’s authority to the extent necessary to protect B’s interest in the sale proceeds.

Option C

A’s death does not give B an option to avoid the agency. On these facts section 202 preserves the authority needed to protect B’s existing interest.

Option D

B’s surviving authority to sell the land for repayment binds the inherited estate. C takes the land subject to that authority.

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