Termination of Agency – Termination by Operation of Law

 Termination of Agency

Sections-201 to 210 provide the circumstances under which the contract of agency may be terminated. It may be terminated by:

(a) act of the parties 

 (b) operation of law.

(1) By Agreement: Agency may be terminated by an agreement. In the contract of agency, sometimes it is provided as to how the agency may be terminated Such provisions are expressly or impliedly provided under the contract, or the agency may be terminated with the understanding of the parties.

(2) Revocation by the principal: At any point of time, the principal can revoke the authority given to the agent.

Circumstances under which agency cannot be terminated: The circumstances under which an agency cannot be terminated are stipulated in Section- 202, 203 and 204 of the Indian Contract Act.

(1) When interest of agent is in the subject of agency: (Section-202)

When under a contract of agency, the interest of the agent is involved in the subject matter of agency and there is no stipulation to the contrary, the agency in question cannot be terminated.

(2) The powers given to an agent cannot be revoked once they are exercised: (Section-203)

A principal cannot revoke the powers given by him to the agent once the agent exercises them.

Illustration: A gives power to buy ten gross of ‘Yera’ glasses to B on his behalf. B is also empowered to make payment out of A’s power of making payment.

(3) Powers cannot be revoked if they are partially exercised: (Sec-204)

When the powers granted to an agent are partially exercised they cannot by revoked so as to avoid the consequences and liabilities arising therefrom.

Illustration: A empowers B to buy three ‘Usha’ sewing machine on his behalf and to make payment out of his money lying with the latter. Under this power B buys three machines for A. In this case A cannot revoke B’s power to make payment.

(4) When agent relinquishes the agency business: When time is stipulated in the agency contract the agent can relinquish the business after duly serving the notice. the principal is liable to pay compensation when the agent is relinquishing the business before the period stipulated in the contract.

 Termination of Agency

Termination by Operation of Law:

Termination by Operation of Law
Termination by Operation of Law

(1) Performance of the contract: When the transaction is completed, the agency terminates.

(2) Expiry of time: Where the agency is for a fixed period, the agency

terminates on the expiry of that time, even if the work is not completed.

(3) Destruction of subject-matter: Where agency is for the sale of a horse

or a house, if the horse dies or a house is destroyed by fire, the agency is terminated.

(4) Death or Insanity of principal or agent: Death or insanity of the principal or the agent terminates the agency.

(5) Insolvency of the principal: According to Section-201, “the agency is terminated by the principal being adjudicated as an insolvent under provision of any act. The insolvency of the agent does not terminate agency. “

(6) Termination of sub-agent’s authority: According to Section-210,”Termination of the authority of an agent causes the termination of the authority of all sub-agents appointed by him.”

(7) Dissolution of company: In case of a company, the agency comes to an end as soon as the company is dissolved.

(8) Principal becoming alien enemy: If the principal and the agent belongs to different countries and a war breaks out between the two countries, the contract of an agency is terminated.

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 so far regards third persons before it becomes known to them

 Termination of Agency

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