Termination of Agency by Operation of Law
Termination of an agency can also occur through the operation of law, which means that certain events or legal circumstances automatically bring an end to the agency relationship. These situations are beyond the control of the parties involved and are predetermined by law.
1. Completion of the Business of the Agency: Once the purpose for which the agency was established is fulfilled, the agency relationship comes to an end. This means that if the task or objective for which the agent was appointed is achieved, there is no longer a need for the agency to continue. For example, if an agent was appointed to sell a specific property, once the property is sold, the agency is terminated automatically.
2. Expiry of Time: If the agency was created for a specific period, it terminates upon the expiration of that period. This means that the agency relationship only lasts for the duration agreed upon by the parties. Once the specified time elapses, the agency ceases to exist unless renewed or extended by mutual agreement.
3. Death of the Principal or the Agent: The agency automatically terminates upon the death of either the principal or the agent. This is because agency is a personal relationship based on trust and confidence between the parties. With the death of one of the parties, it becomes impossible to continue the agency relationship as originally intended.
4. Insolvency of the Principal: If the principal becomes insolvent, meaning they are unable to pay their debts, the agency is terminated. This is because an insolvent principal may not be able to fulfill their obligations or honor the contracts entered into by the agent on their behalf. Thus, the agency relationship is terminated to protect the interests of all parties involved.
5. Destruction of the Subject Matter: If the subject matter of the agency is destroyed or becomes illegal, the agency terminates automatically. For example, if an agent is appointed to manage a specific piece of property, and that property is destroyed by fire or natural disaster, there is no longer any purpose for the agency to continue.
6. Dissolution of a Company: If either the principal or the agent is a company and it gets dissolved, the agency terminates. This occurs because the legal entity that entered into the agency relationship no longer exists. Therefore, there is no longer a principal or agent to carry out the obligations under the agency agreement.
7. Principal or Agent Becomes an Alien Enemy: If either the principal or the agent becomes an alien enemy, meaning they are citizens or residents of a country at war with the country of the other party, the agency terminates automatically. This is due to the inherent conflict of interest and potential inability to act in the best interests of the other party during times of war.
Termination of Agency : Indian Contract Act, 1872
The Indian Contract Act 1872 regulates contracts and agency relationships in India. An agency is a situation where one person, called an agent, acts for another person, known as the principal, with the latter’s permission. Termination of the agency is when this arrangement ends. It can happen in two ways: either the parties decide to end it themselves or certain events or laws require it to stop. So, termination of the agency is simply when the agent stops acting on behalf of the principal, either because they both agreed to stop or because certain events or laws make them stop.
Geeky Takeaways:
- Termination of agency under the Indian Contract Act can occur through mutual agreement, revocation by the principal, or voluntary renunciation by the agent.
- Agency relationships can also terminate automatically under specific circumstances, such as completing the agency’s purpose, expiration of a specified time, or the death or insolvency of the principal.
- The timing of termination varies, with immediate effect for mutual agreement, upon notification for revocation, and after reasonable notice for renunciation by the agent.
- Irrevocable agency may arise in situations involving an interest vested in the agent, potential personal loss upon revocation, or partial exercise of authority by the agent.
Table of Content
- Termination of Agency under Indian Contract Act, 1872
- Termination of Agency by Act of the Parties
- Termination of Agency by Operation of Law
- When Termination of Agency Takes Effect?
- Irrevocable Agency under Indian Contract Act
- Conclusion
- Termination of Agency: Indian Contract Act, 1872- FAQs
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