Final answer:
The termination of an agency is effective when the agent receives notice, as it is necessary for the agent to know they can no longer act on behalf of the principal.
Step-by-step explanation:
When an agency relationship is terminated by the principal, the correct statement is: (c) the termination is not effective until the agent receives notice. There are a few reasons for this, primarily because the agent needs to be aware that they no longer have the authority to act on behalf of the principal. It is the agent's knowledge of the termination that prevents them from inadvertently entering into agreements that could bind the principal after the termination date.
In addition to the agent, third parties also have a right to be notified, but the immediate effect on the agent's authority occurs once they are informed of the termination. If the termination is not communicated and the agent continues to act in good faith, the principal may still be bound by the agent's actions during that period. Hence, clear communication is crucial in the termination of an agency.