SPECIAL CONTRACTS ASSIGNMENT

TERMINATION OF AGENCY

SUBMITTED TO: SUBMITTED BY:

PROF. KESHAVMOORTHY SHIKSHA SINGH
17BLA1051
 INRODUCTION

The contract of agency is defined as one where one party the principal,
grants authority to another party- the agent, to act on behalf of and under the
control of the principal to deal with a third party.
An agency relationship is fiduciary in nature. An agency can be create
d by express or implied appointment, necessity or estoppel. There are
certain duties that the parties owe each other. Since the relationship of
agency is one that is based on trust, there may arise circumstances
where this trust no longer subsists and as a result, the agency may
have to be terminated. An agent’s authority can be terminated at any
time. If the trust between the agent and
the principal has broken down, it is not reasonable to allow the
principal to remain at risk in any transactions that the agent might
conclude during a period of notice.

AGENCY

Section 182 of the Indian contracts act 1872, defines Agent &
Principal: an agent is a person employed to do any act for
another, or to represent another in dealings with the third
parties. The person for whom such act is done, or who is
represented, is called the principal. Agency is the relationship
that subsists between the principal and the agent, who has been
authorized to act for him or represent him in dealing with
others. Thus, in an agency, there is in effect two contracts i.e.
a) Made between the principal and the agent from which the
agent derives his authority to act for and on behalf of the
principal; and b) Made between the principal and the third
party through the work of the agent. Any person, who is of the
age of majority according to the law to which he is subject, and
who is of sound mind, can employ an Agent1. As between
Principal and third person, the third person can become3 an
Agent, so as to be responsible to his principle according to the
provisions as in the Act.

No consideration is necessary to create an agency. Several

types of commercial agents have been recognized under Indian
law, which includes inter alia brokers, auctioneers, del credere
agents, persons entrusted with money for obtaining sales and
insurance agents.

TERMINATION OF AGENCY

By Agreement:
On the basis that agency relationship is created by agreement between
the principal and the agent, such a relationship can also ended by
mutual agreement between the parties, either in writing or oral
Termination by agreement may also occur if the agency relationship
is terminated. The following situations may arise in this context: If the
agreement provides for the appointment of the agent for a specified
period of time, the agency will come to an end automatically when
that period of time expires. If the agreement provides for the agency
to terminate upon the occurrence of a specified event, the agency will
come to an end upon the happening of the specified event.

By the Acts of the Parties:

An agency may be terminated by the acts of the either principal or the agent
as illustrated below:

Performance by the Agent

If an agent is appointed to accomplish a particular task or for a specific

purpose, when the task is accomplished by the agent or the specific purpose
is attained, the agency will terminate.
Revocation by the Principal

The authority of an agent may be revoked at any time by the principal.

However unilateral revocation otherwise than in accordance with the
provisions of the agency agreement may render the principal liable to the
agent for the breach of agency agreement. Any word or conduct of the
principal inconsistent with the continued exercise of the authority by the
agent may operate as revocation of the agency.
Revocation’s of the agent’s power by the principal may not automatically
discharge the principal from liability to a third party who is entitled to rely
from liability to a third party who is entitled to rely from liability to a third
party who is entitled to rely from liability to a third party who is entitled to
rely on the apparent authority of the
agent on grounds of representation by the principal of previous course of
dealing with the agent’s before notice of revocation is given to the third
party. Therefore, notice of revocation of an agent’s power should be given
to the third party as soon as possible.

Renunciation by agent

An agent is entitled to renounce his power by refusing to act or by notifying

the principal that he will not act for the principal. Unilateral termination of
the agency by the agent before he has fulfilled the obligations to the
principal under the agency agreement will render the agent liable to the
principal for the breach of the agency agreement such as payment of
damages for the loss suffered by the principal.

By Notice
If the agency agreement provides that the agency may be terminated
upon either party serving on the other written notice of a specified
duration. However, if the agency agreement does not contain any
termination provision, the general rule is that reasonable notice has to
be given to the other party to terminate the agency.
By Operation of Law
An Agency may terminate by the operation of law upon the
occurrence of particular events.
Where the party concerned is an individual:
 By Death
 By Insanity
 By Bankruptcy
Where the party concerned is a company
 Winding up
 Receivership
Frustration of the contract of Agency.
 CASE LAWS

 R. Sayani v Bright Bros (P) Ltd, AIR1980 Mad 162

Where an agency has been created for a fixed period, compensation
would have to be paid for its premature termination, if the termination
is without sufficient cause. Reasonable notice for premature
determination of agency was not given. The agent
was earning Rs. 4000 per month. The court was
of the view that at least three months’ notice should have been given.
A compensation of Rs. 12,000 was accordingly allowed.

 Carter v White, (1883) 2 Ch D 666: (1881-85) All ER Rep 921.

A principal owed a sum of money to his agent and gave him an
accepted bill of exchange with an authority to fill in the drawer’s
name. The principal died before the agent could complete the bill. His
authority to fill in the drawer’s name was held not to be terminated.

 Sukhdev v Commr of Endowments, (1998) 1 BC 403 (AP)

An agency comes to an automatic end on the expiry of its term.
Where the agency was to run a petrol pump for a specific 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.
  Trueman v Loder (1840) 11 Ad & El 589
Here A traded as B’s agent. With the authority of B, all parties with
whom A made contracts in that business, were held to have a right to
hold B liable to them until B gives notice to the world that A’s
authority is revoked and it makes no difference if in a particular case
the agent intended to keep the contract on his own account. The court
repelled the contention that it was very unreasonable to expect that the
principal should inform the whole world that he has cancelled the
power of attorney given to his agent and that he cannot be expected to
approach everybody with whom the agent was likely to enter into a
contract and inform him of the cancellation.

Effect of Termination of Agent’s Authority

Sometimes former agents continue to act on their ex principals’ behalf even

though the agency has ended. Once an agency terminates by any of the
means just described, the agent’s actual authority (expressed and implied)
ends as well. Nonetheless, such “ex-agents” may retain apparent authority
to bind their former principals. Third parties who are unaware of the
termination may reasonably believe that an ex-agent still has authority. To
protect third parties who rely on such a reasonable appearance of authority,
an agent’s apparent authority often persists after termination. Thus, a former
agent may be able to bind the principal under his apparent authority even
though the agency has ended.

Notice to Third Parties

Apparent authority ends only when the third party receives appropriate
notice of the termination, that is, when it is no longer reasonable for a third
party to believe that the agent has actual authority. Some bases for
termination by operation of law (such as changed circumstances) may
provide such notice.
Under the Restatement (Third) of Agency, an agent’s apparent authority
may continue even after the principal’s death or loss of capacity. An agent
may act with apparent authority following the principal’s death or loss of
capacity because the basis of apparent authority is a principal’s
manifestation to third parties, coupled with a third party’s reasonable belief
that the agent acts with actual authority. When third parties do not have
notice that the principal has died or lost capacity, they may reasonably
believe the agent to be authorized. The rule that the principal’s death does
not automatically terminate apparent authority is consistent with the interest
of protecting third parties who act without knowledge of the principal’s
death or loss of capacity. The required type of notification varies with the
third party in question. For third parties who have previously dealt with the
agent or who have begun to deal with the agent, actual notification is
necessary. This can be accomplished by (1) A direct personal statement to
the third party; or (2) A writing delivered to the third party personally, to his
place of business, or to some other place reasonably believed to be
appropriate. For all other parties, constructive notification Usually, these
other parties are aware of the agency but did no business with the agent.
.