MEANING OF TERMINATION OF AGENCY

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Q.10    Describe the termination of an agency?

Ans:    MEANING OF TERMINATION OF AGENCY 

Termination of agency implies the end of the relationship of principal and agent.

MODES OF TERMINATION OF AGENCY

The various mode in which the agency may be terminated have been shown in Fig:

 

 

(a)        By Mutual Agreement

An agent is terminated if the principal and agent mutually agree to do so.

 

(b)        By Revocation of Authority by the Principal

An agency is terminated if the principal revokes the authority of his agent. It may be noted that the principal may revoke the authority of his agent at any time before the authority has been exercised so as to bind the principal.

(c)        By Renunciation of Agency by the Agent

The agency is terminated if the agent himself renounces the business of agency. Provision relating to Revolution or renunciation [Section 205, 206 and 2071

(i)         Compensation for Revocation by Principal, or Renunciation by agent [Section 205]

Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause [Section 206].

(ii)        Notice of Revocation or Renunciation [Section 206]

Reasonable notice must be given of such revocation or renunciation, other wise the damage thereby resulting to the principal or the agent, as the case may be must be made good to the one by the other.

(iii)       Revocation & Renunciation may be expressed or Implied [Section 207]

Renunciation may be expressed or may be implied in the conduct of the principal or agent, respectively.

EXAMPLE

A empowers B to let A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority.

 

TERMINATION OF AGENCY BY OPERATION OF LAW

(a)        On completion of the Business of the Agency [Section 201]

An agency is automatically terminated when the business of the agency is completed.

EXAMPLE

X appointed Y to sell his goods. Y sold those goods as per terms of the agency. It was held that the agency is terminated on the completion of sale and the agent has no authority to after the terms of sale after its completion.

(b)        On Death / or on Becoming of unsound Mind of principal / Agent [Section 201J

An agency is automatically terminated when the principal or agent dies or becomes of unsound mind.

Duty of Agent [Section 209]

The agent is bound to take, on behalf of the representative of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

(c)        On insolvency of the Principal [section 201]

An agency is automatically terminated when the principal becomes insolvent because an insolvent person is incompetent to enter into a contract.

(d)        On Expiry of Fixed Period

An agency is automatically terminated when the fixed term of agency expires even thought the business of the agency has not yet completed.

(e)        On Destruction of the Subject-matter

An agency is automatically terminated when the subject matter of the contract ceases to exist.

(f)         On winding up of company

An agency is automatically terminated when the principal or agent is a company and the company is wound up.

(g)        On principal Becoming an Attest Enemy

An agency is automatically terminated when the principal and agent is citizen of two different countries arid a wax breaks out between these two countries.

 

EFFECTIVE TIME OF TERMINATION OF AGENT’S AUTHORITY [Section 208]

Party

Time when termination of agent’s authority takes place

i.          As regards the agent When the agent comes to know that his authority has been terminated.
ii.          As regards the third persons When they come to know that the agent’s authority has been revoked.
iii.         As regards the sub-agent When the original agent comes to know that his authority has been terminated.

 

Thus termination may be effective at a different time as regards the agent and as regard, the third persons.

EXAMPLE I

A directs B to sell goods for him and agrees to give B five percent commission on the price fetched by the goods. A, afterwards, by a letter, revokes S’s authority. B, after the letter is sent but before he receives it, sells the goods for Rs. 10,000/=. The sale is binding on A and B is entitled to Rs.500 as his commission.

EXAMPLE II

A, Lahoreby letter, directs B to sell for him some cotton lying in a warehouse in Bombayand afterwards by a letter, revokes his authority to sell, and directs B to send the cotton to Lahore. B, after receiving the second letter, enters into a contract with C, who knows the first letter, but not of the second, for the sale of him of the cotton. C pays B the money, with which B absconds, Cs payment is good, as against A.

EXAMPLE III

A direct B, his agent, to pay certain money to C, A dies and D being A’s executor takes out probate of his will. S, after A s death, but before hearing of it, pays the money to C. the payment is good as against D, the executor.

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There is no privity of contract between a sub-agent and principal and hence both cannot sue each other except that in case of fraud or willful wrong committed by a properly appointed sub-agent, the principal can sue sub- agent.

There is a privity of contract between a substitute agent and principal hence both can sue each other.

3.

Original agent’s responsibility

The original agent is responsible for the acts or negligence of the sub-agent.

The original agent is not responsible for the acts or negligence of the substitute agent if in selecting such agent the has exercised the same amount of diligence as a man of ordinary prudence would exercise in his own case.

 

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