Termination of an Agency

Essentially, there are two broad facets of the termination of agency

1. By the act of the parties
2. By Operation of law

By acts of the parties themselves

Agreement of the parties

The most obvious way by which an agency relationship may be terminated is by mutual agreement between the principal and the agent. Since the relationship of principal and agent is usually created by agreement between the parties, it follows that relationship can also be determined by mutual agreement (bilateral).

However, where an agency has been created to accomplish a certain purpose or for the duration of a definite period, then the agency automatically ends with the completion of the specific purposes, or when the period has elapsed

Revocation or Reunification

The agency relationship can be determined by the unilateral revocation of the authority by the principal. In this case, express notice must be given to the third party with whom the agent has been dealing, otherwise the agent will be assumed to have continuing authority to contract for the principal.

Similarly, the agent can unilaterally renounce the authority of the principal and must give notice to the effect. But the notice of revocation or renunciation will not affect any rights or liabilities which may have been created between the principal and third party prior to the notice.

Operation of Law

Death

The death of the agent obviously terminates his authority. Except in cases of irrevocable agencies, the death of the principal or the liquidation of the principal puts an end to the agency relationship. This is so even if the agent had knowledge of the death of his principal. The agent cannot sue for remuneration or indemnity

In addition, the agent may be liable to the third party for breach of warranty of authority.

Insanity

Once either the principal or agent is insane, the contract of agency automatically comes to an end except of course in cases of irrevocable agencies. But the rights of third parties are unaffected provided that the third knew nothing of the principal’s condition. See Drew v. Nunn

Bannkruptcy

Bankruptcy of an agent terminated the relationship

Subsequent Illegality

The occurrence of an event that renders the continuance of the agency unlawful may also being an agency relationship to an end

Frustration

The destruction of the subject matter of the agency for example, or the occurrence of any other frustrating event may terminate an agency relationship.