CA Foundation Exam > CA Foundation Questions > An agency is irrecoverable:a)Where the author...
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An agency is irrecoverable:
- a)Where the authority of agency is one coupled with interest
- b)Where the agent has incurred personal liability
- c)Both (a) and (b)
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
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An agency is irrecoverable:a)Where the authority of agency is one coup...
Explanation:
- Authority of agency coupled with interest: An agency is irrevocable if the authority of the agent is coupled with an interest. This means that the agent has a personal interest in the outcome of the agency relationship, such as receiving payment or benefits. In such cases, the agency cannot be revoked by the principal.
- Agent has incurred personal liability: If the agent has incurred personal liability in carrying out their duties, the agency becomes irrevocable. This means that the agent is personally responsible for any debts or obligations arising from the agency relationship, and the principal cannot simply revoke the agency to avoid liability.
- Both (a) and (b): The correct answer is both (a) and (b) because an agency is irrevocable when the authority of the agent is coupled with an interest, and when the agent has incurred personal liability.
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An agency is irrecoverable:a)Where the authority of agency is one coup...
Understanding Irrecoverable Agency
An agency is considered irrecoverable when certain conditions are met. The correct answer is option 'C', which includes both situations mentioned in options (a) and (b). Here’s a detailed explanation:
1. Authority of Agency Coupled with Interest
- An agency is irrevocable when the agent has an interest in the subject matter of the agency. This means the agent has a stake or a benefit that cannot be easily taken away.
- For example, if an agent is given the authority to sell a property and has invested money in it, they cannot be dismissed without proper cause, as their financial interest is tied to the agency.
2. Agent Incurring Personal Liability
- An agency becomes irrevocable when the agent has incurred personal liability. If the agent enters into contracts or obligations on behalf of the principal that result in personal risk, the principal cannot simply terminate the agency without facing potential consequences.
- This creates a situation where the agent’s personal stakes protect their authority, making the agency relationship more secure.
Conclusion
- Therefore, in situations where the authority is coupled with an interest and where the agent has incurred personal liability, the agency cannot be revoked without just cause. Both factors contribute to the agency's irrecoverability, making option 'C' the correct answer. This assures that agents are protected when they have invested or risked their own interests in the agency relationship.
An agency is considered irrecoverable when certain conditions are met. The correct answer is option 'C', which includes both situations mentioned in options (a) and (b). Here’s a detailed explanation:
1. Authority of Agency Coupled with Interest
- An agency is irrevocable when the agent has an interest in the subject matter of the agency. This means the agent has a stake or a benefit that cannot be easily taken away.
- For example, if an agent is given the authority to sell a property and has invested money in it, they cannot be dismissed without proper cause, as their financial interest is tied to the agency.
2. Agent Incurring Personal Liability
- An agency becomes irrevocable when the agent has incurred personal liability. If the agent enters into contracts or obligations on behalf of the principal that result in personal risk, the principal cannot simply terminate the agency without facing potential consequences.
- This creates a situation where the agent’s personal stakes protect their authority, making the agency relationship more secure.
Conclusion
- Therefore, in situations where the authority is coupled with an interest and where the agent has incurred personal liability, the agency cannot be revoked without just cause. Both factors contribute to the agency's irrecoverability, making option 'C' the correct answer. This assures that agents are protected when they have invested or risked their own interests in the agency relationship.
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An agency is irrecoverable:a)Where the authority of agency is one coupled with interestb)Where the agent has incurred personal liabilityc)Both (a) and (b)d)None of the aboveCorrect answer is option 'C'. Can you explain this answer?
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