Agency termination occurs when the connection between the principal and the agent ends. A third party known as the agency in the contract establishes an agreed-upon relationship between the principal and the agent by agreement or law. The agent negotiates with third parties on behalf of the principal.
Section 182 of the Indian Contract Act defines the agents and principals. Any person on whose behalf or under whose authority an agent works is referred to as the principal. Example: your boss at work.
Termination of Agency
As previously stated, termination of agency indicates the end of the legal connection between principle and agent. Sections 201 to 210 of the Indian Contract Act 1872 provide for the termination of Agency.
Section 201 of the Indian Contract Act 1872 provides for the termination of an agency.
An agency is terminated when the principal revokes his authority, the agent renounces the agency’s business, the agency’s business is completed, either the principal or agent dies or becomes mentally ill, or the principal is adjudicated an insolvent under the provisions of any Act currently in force for the relief of insolvent debtors.
Agency may be ended in two ways:
1) By the Act of the Parties –
2) BY operation of law –
1) By the act of the parties –
- i) By agreement – The Contract of Agency may be dissolved at any moment by mutual consent between the principal and agent.
- ii) By revocation of the principal – The Principal may revoke agency at any time by providing notice to the agent.
iii) Renunciation of an agent – Renunciation refers to retiring from responsibilities as Agent. Agents, like principals, can abandon the agency. Section 206 of the Indian Contract Act 1872 requires the agent to provide his Principal reasonable notice of renunciation. Otherwise, he will be obligated to compensate the principal for the loss caused by the failure to provide such notification.
2) By operation of law –
Agency can be terminated via the operation of law.
- i) By the completion of the agency – The agency may come to an end after the work for which it was created is completed.
- ii) By the expiration of time – The agency may also be terminated by the expiration of time. If the agency is created for a specified amount of time, it is canceled after that time expires.
iii) Death or insanity of principal or agent – Section 209 of the Indian Contract Act 1872 requires an agent to cancel the agency contract upon the principal’s death. In other words, agency ends with the death or insanity of the primary or agent.
- iv) Insolvency of principal – According to Section 201 of the Indian Contract Act 1872, an insolvent or bankrupt is someone who is unable to conduct a business due to an excess of liabilities over assets. In this method, if the principal becomes insolvent, the agency may be terminated.
- v) Destroy the subject matter – If the agency’s subject matter is destroyed, the agency ceases to exist.
For example, if an agency is formed to sell an airplane, and the plane catches fire before the sale, the agency ceases to exist. The subject content of this contract is Airplane.
- vi) Alien enemy: If the Principal becomes an alien enemy, the agency contract terminates.
vii) Dissolution of a company or firm – A firm or company may be considered a Principal in an agency contract. If the company or firm is dissolved, the agency ends.
The various ways in which an agency might die
In accordance with the provisions of Section 201 of the Indian Contract Act of 1872, the termination of agency occurs when the following conditions come into play:
- In the event that the principal decides to revoke authority.
- owing to the fact that the agent decided to give up his power.
- Concerning the agency’s ability to fulfill the terms of the contract.
- whenever either the main or the agent passes away.
- due to the lunacy of either the principal or the agent.
- in light of the fact that the time period that was predetermined for the agency’s contract has concluded.
- according to a contract that was established between the principal and his representative.
- In a rare instances, when the principal or agent is unable to pay their debts.
- As a result of the dissolution of the incorporated firm in which the principal and his agent are involved
- This is due to the fact that the subject matter was destroyed. the 56th segment
