Smart v Sandars
Rule established
An agency is coupled with an interest only where the authority was conferred for the purpose of securing that interest. An interest acquired after the authority was given does not make the authority irrevocable.
Facts
- The plaintiffs consigned corn to the defendants, who were factors, for sale on the plaintiffs' account.
- The defendants thus held authority to sell the corn.
- Subsequently, and at the plaintiffs' request, the defendants made advances of money to the plaintiffs.
- The plaintiffs then instructed the defendants not to sell the corn.
- The defendants nevertheless sold it, seeking to apply the proceeds towards repayment of their advances.
- The plaintiffs sued for wrongful sale.
Issue
- Whether the authority to sell had become irrevocable because the factors subsequently made advances on the security of the goods.
Held
- The authority remained revocable and the sale was wrongful. The court held that where an agent is given authority to sell and afterwards makes advances to his principal, the authority does not thereby become irrevocable. An agency is coupled with an interest only where the authority is given as part of the security, so that the authority and the interest are created together. Since the advances postdated the authority, the authority was a bare authority which the principal could revoke.
Ratio Decidendi
The irrevocability of an authority coupled with an interest rests on the authority being the mechanism by which the agent's interest is secured. Where the interest arises later and independently, revoking the authority does not destroy any right the agent acquired in exchange for it, so the ordinary power of revocation survives.
How to use it in an exam
- The leading authority on the timing requirement in S.202 of the Indian Contract Act.
- The critical question in any problem: was the authority conferred to secure the agent's interest, or did the interest arise afterwards?
- Contrast the situation where an agent lends money at the time of appointment and is authorised to sell specified goods and apply the proceeds, which is a true agency coupled with an interest.
- Note the agent's alternative protections: a lien under S.221, and the restriction on revocation where authority has been partly exercised under S.204.
Source
Source: (1848) 5 CB 895; 136 ER 1132; leading authority on the timing requirement for an agency coupled with interest; proposition confirmed via Halsbury; the report page numbers were not independently confirmed
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.