Irrevocable Agencies

Photo by Matito is licensed under CC 2.0.

As I discussed in a previous post, a principle can generally terminate an agency relationship at any time. After all, the agent acts on behalf of the principal, as if the agent were the principal himself, and so it makes sense that the principal should be able to terminate this arrangement whenever he likes.

There are, however, situations in which a power given to an agent is irrevocable, even by the principal. Once given, these powers cannot be reassumed.

Irrevocable Agencies at Common Law

At common law, the only situation that gave rise to irrevocable agencies was where the agency power was given as a security or where the power was coupled with an interest—both of which mean essentially the same thing. In this situation, the agent has essentially paid for the right to serve as the agent.

So, for example, if John borrows $10,000 from Stacy and appoints Stacy as his agent to sell a piece of property, the proceeds of which will repay John’s debt to Stacy, there exists an agency power coupled with an interest.

Irrevocable Agencies Today

Today, situations in which agency is irrevocable is usually provided for by state statute. This means that the legislature has determined some agency relationships to be so unique that to allow for their discretionary termination would cause significant harm.

Generally, if the principal grants authority to be held for the benefit of the agent or a third party in order to protect legal or equitable title or to secure performance of a duty other than the duty owed by the principal incidental to the agency, the agency is irrevocable. This is not too different than the common law approach, though specific statutory requirements will vary from state to state. (Irrevocable agencies sometimes exist today in the context of publishing contracts.)

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See Also:

Agency Relationships

Creating and Terminating an Agency Relationship