Final answer:
The bankruptcy of either the principal (Henry or the movie production house) or the agent (the law firm) individually could lead to the termination of the agency relationship, and it isn't necessary for both parties to be bankrupt for this to occur.
Step-by-step explanation:
The agency relationship can be terminated by the bankruptcy of the principal or the agent depending on the nature of the agency and the terms of the agency agreement. Generally, the bankruptcy of the principal, which in this context could be Henry if he is employing the law firm, or the movie production house if it has engaged with Henry for his services, can lead to termination of the agency relationship because the principal might not be able to fulfill the obligations under the agreement. Similarly, if the law firm, acting as the agent, goes bankrupt, it would likely lack the resources or legal capacity to continue its agency duties, thus terminating the agency relationship.
Therefore, the correct answer to the student's question is that the bankruptcy of either Henry, the law firm, or the movie production house individually could terminate the agency relationship, and it is not necessary for both Henry and Chase to be bankrupt to terminate the agency.