Termination or Determination of Agency

Agency may be terminated in any of the following ways:

By act of parties: (Sec 201) Agency may be terminated by act of the parties in any of the following ways:

1) By agreement: Agency may be terminated by the parties by an agreement at any time by mutual consent.
2) By revocation and renunciation: An agency is terminated by principal revoking agent’s authority by notice or by renunciation by an agent by notice (Law as to revocation and renunciation is discussed under agent’s authority above).
3) By renouncing: When the agent renounces the business of the agency. The agency is terminated.
4) By completion or performance: When the business for which the agency was constituted is completed or performed, the agency is terminated. For example, when an agent is appointed to sell a house, agency is completed when the house is sold.

By operation of law: (Sec 201) Agency is terminated by operation of law in any of the following ways:

By death or insanity: When the principal or agent dies or, becomes of unsound mind, the agnecy8 is terminated. In case of corporation, the agency is terminated on its being wounded up. In India, mere death of the principal cannot terminate the agency until the agent until the agent has heard of it. In England, death of principal determines the agency at once.

Agent’s duty: When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to undertake, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interest entrusted to him (Sec 29). It is, therefore, the duty of the agent to protect the interest of legal representatives.

By insolvency of the principal: On principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors, the agency is terminated.

Other modes of termination of agency:

1) By efflux of time: Where an agency is for a fixed period of time, it is terminated on the expiry of time whether the purpose for which the agency is constituted is accomplished or not.
2) By destruction of the subject matter: When the subject matter of the agency is destroyed, the agency is terminated
3) By incapacity of principal or agent: Where a principal or an agent possesses any disqualification essential to a contract, agency is terminated.
4) Principal or agent becoming an alien enemy: Where the principal or the agent belongs to different countries and they become alien enemies, the agency is terminated.
5) By object of agency becoming unlawful: When by the happening of an event which renders agency or its object unlawful, the agency is terminated.

Note: Rules applicable to revocation of agency discussed above under ‘Agent’s’ authority apply also to termination of agency.

Effects of termination (Sec 280):

The termination of the authority of an agent, does not so far as regards the agent, take effect before it becomes known to him, or ,s o far regards third persons, before it becomes known to them.

Termination, therefore, takes effect as regards the agent when the agent comes to know of it. As regards third person, termination is effective when it comes to their knowledge. Therefore, if the buyer has no notice of termination of agent’s authority, and he buys the goods, the principal will be liable even if the agent has received notice of the termination of his agency. Death of the principal also terminates the agency when agent receives knowledge of the death of the principal.