Termination of agency

Made By-
Rahul chopra & Shaivesh
2nd Semester
JIMS Engineering Management Technical
Campus
Section A
 What is termination of agency?
 Modes of termination
 Rules of Revocation of authority
 Renunciation of agency by the agents
 Completion of Business
 Death or insanity of the principal or agent
 Expiry of time
 Effect of termination
 What is termination of agency?

O According to Section 201- An agency is

terminated by the principal revoking his
authority or by the agent renouncing the
business of the agency or by the business of
the agency being completed or by either the
principal or agent dying or becoming of
unsound mind or by the principal being
adjudicated an insolvent under the
provisions of any Act for the time being in
force for the relief of insolvent debtors.
 Modes of termination

The section 201 provides for the following

modes of termination.
O Revocation
O Renunciation by agents
O Completion of business
O Death or insanity of the principal or agent
O Insolvency of principal
O Expiry of time
 Rules of Revocation of authority

O It has been noted above that one of the modes of the termination
of agency is the revocation of agent’s authority by the principal
subject to the following rules:-
1 )Revocation may be express or implied
According to section 207,revocation of agency may be either expressed
or implied in the conduct of the principal. For example A empowers B
to let A’s house afterwards a let it himself. This is an implied revocation
of B’s authority.

2) When principal may revoke agent’s authority-

The principal may save as in otherwise provided by the last preceding
section revoke the authority given to his agent at any time before the
authority has been exercised so as to bind the principal
For example- an agent was appointed by a shirt manufacture as a
canvasser and traveller for five year period to sell such goods as may be
forwarded to him. But the principal factory was burned down by a
chance of fire while there were still three year for the agency to go. The
principal never resumed business and ended the agency. He was held
liable in damages as the agency seemed to have been created for
definite term.

3) Revocation when authority has been partly exercised

When the authority has been partly exercised by the agents, there can
be no revocation of agency as regards such acts already done. The
provisions in this regard in contained in Section 204, which is as under-
The principal cannot revoke the authority given his agents after the
authority has been partly exercised so far as regards such acts and
obligations as arise from the acts already done. For example- A
authorizes B to buy 1000 bales of cotton on account of A and to pay for
it out of A’s money remaining in B’s hands. B buys 1000 bales of cotton
in his own name, so as to make himself personally liable for the price. A
cannot revoke B’s authority so far as regards payment for the cotton.
4) Compensation for revocation
When the agency has been created for a fixed time by an express or
implied contract, its premature revocation by the principal will make
him liable towards the agent, unless the revocation has been made
with any sufficient cause. Section 205 makes the following provisions in
this regard-
Compensation for revocation by principal, or renunciation by agents-
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.

5)Principal should give reasonable notice of revocation

According to section 206, when the principal having justification to do
so revokes the authority he must give reasonable notice of such
revocation to the agent, otherwise he can be made liable to make good
any damages, which may be caused to the agent.
 Renunciation of agency by the agents

O As the principal can revoke the agent’s authority ,so also the agent can
renounce the agency. Section 206 requires that the agent must give
principle reasonable notice of renunciation otherwise he will be liable to
make good any damage caused to the principle for want of such notice.
Section 207 further mentions that like revocation, the renunciation may
also be express or may be implied in the conduct of agent. Where, however
there is a contract that is a contract that the agency should be continued
for any fixed period, and the agent makes renunciation ,without any
sufficient cause prior to the expiry of the stipulated cause, prior to the
expiry of the stipulated time, he must compensate the principal for any loss
caused to him by the premature renunciation.
 Completion of Business (Section- 201)

An agency is automatically and by operation of law

determined when its business is completed. Thus, for
example, the authority of an agent appointed to sell goods
ceases to be exercisable when the sale is completed. He
cannot afterwards alter the terms of the sale. But the
Allahabad and Calcutta High courts have held the agency is
not terminated on the completion of the sale but
continues until payment of the sale proceeds to the
principal.
 Death or insanity of the principal or agent

O An agency is determined automatically on the death or insanity of

the principal or the agent. Winding up of company or dissolution
of a partnership has the same effect. Section 201 make it clears
that on the death of an agent his agency comes to an end but it
does not obliterate acts done by the agent on behalf of the
principle during the tenure of his agency.
O Section 209 -Agent’s duty on termination of agency by
principal’s death insanity
when an agency is terminated by the principal dying or becoming
of unsound mind, the agent is bound to take, on behalf of the
representatives of his late principle, all reasonable steps for the
protection and preservation of the interests entrusted to him.
 Expiry of time

Where an agent has been appointed for a fixed term, the

expiration of the term puts an end to the agency, whether
the purpose of the agency has been accomplished or not.
An agency comes to an automatic end on the expiry of its
term. Where the agency was to run a petrol pump for a
specified period, it was held that the agent was bound to
vacate the premises on expiry of the period. There was no
renewal clause nor in fact there was any renewal.
 Effect of termination

O According to section 208, the termination of the authority of an

agent does not, so far as regards the agent, take effect before it
becomes known to him, so far as regards third persons before it
becomes known to them.
O The termination of the agency does not become effective
immediately. It takes effect-
(i) Against the agent, when the fact of termination becomes known
to him, and
(ii) Against third persons ,when it becomes known to them
For example-A directs B, his agent, to pay certain money to C, A
dies and D takes out probate to his will. B, after A’s death, but
before hearing of it, pays the money to C. The payment is good as
against D, the executor.