134,657 views
7 votes
7 votes
Describe in depth the ways a principal-agent relationship can end.

User Jbmcle
by
3.2k points

1 Answer

20 votes
20 votes

Answer:

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 can be terminated by the following ways:

By Agreement

On the basis that agency relationship is created by agreement between the principal and the agent, such a relationship can also be brought to an end by mutual agreement between the parties, either in writing or orally.

Termination by agreement may also occur if the agency relationship is terminated pursuant to the provisions of the agreement itself. 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 Act Of Parties

An agency may be terminated by the acts of either the 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 an agency agreement.

Any word or conduct of the principal inconsistent with the continued exercise of the authority by the agent may operate as a 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 ground’s 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 limited company:

Winding up

Receivership

The frustration of the contract of agency.

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 authorised 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 Agent. As between Principal and third person a person may become an Agent, so as to be responsible to his Principal according to the provisions contained in the Act. No consideration is necessary to create an agency[iii]. 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.

User Shayna
by
3.0k points