Discuss the Modes in which the Agency can be Terminated.

Termination of agency occurs when the relationship between the principal and the agent comes to an end. Like any other contract, the contract of agency may terminate by the act of the parties or by operation of law. So broadly speaking, the modes of termination of agency may be explained under the following two headings:

  1. By the act of the parties.
  2. By operation of law.

By the Act of the Parties:  

An agency may be terminated by act of the parties in the following ways:

By agreement between principal and agent: The parties are free to terminate the contract of agency mutually. Such as agreement may be made at any time and at any stage.

By revocation of agents authority by the principal: The principal can revoke the authority of the agent any time before the authority has been exercised so as to bind the principal, Revocation on may be express or may be implied.

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By Renunciation of agency by the agent: The agency is terminated if the agent himself renounces the business of agency.

Revocation is subject to the following conditions:

Revocation can be done only before the authority has been exercised by the agent.

Where an agency has been created for a fixed period, a reasonable notice should be given of such revocation.

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 for any revocation without sufficient cause. Moreover, such revocation should be after a reasonable notice.

The agent may renounce the business of agency in the same manner in which the principal has the right of revocation. If the agency is for a fixed period, the agent would have to compensate the principal for any loss caused due to earlier termination of agency without sufficient cause. Moreover, a reasonable notice should be given to the principal.

Termination of Agency by Operation of Law

The principal/ agent relationship may be terminated by operation of law in the following circumstances:

Completion of business: The agency automatically terminated when the business is completed for which it was made.

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Death or insanity of either party: When the agent or the principal property other than actionable claims money, and includes stock and shares, growing crops, grass and things attached to or forming part of land which are agreed to be severed before sale or under the contract of sale.

Every kind of movable property and includes stock and shares, growing crops and grass.

Things attached to land can be the subject matter of sale (e.g.,growing grass, trees etc.) provided they are agreed to be separated from land under the contract of sale.

Money and actionable claims are not to be treated as goods. Money, being the legal tender itself, cannot be a subject. matter of a contract of sale. However, foreign currency or coins, which no more is the legal tender, is included in ‘goods’.

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Actionable Claim in simple words are the claims which rest on the readiness of courts to recognize them as enforceable under an action by a party e.g., a book debt or bill of exchange. The actionable claims are transferable under other laws, such as the Transfer of Property Act or Negotiable Instrument Act.

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