Assignment on

Termination of Agency

Course Tittle: Law of Contract (II)

Course Code: LLB-132

Submitted to

Bahreen Khan

Assistant professor

Department of Law and Justice

Southeast University

Prepared by

Rifat Bin Zaman

ID: 2019220300003

Batch:49-A

Date of Submission: 05-10-2020

 CONTENT
1. Introduction
2. Termination of Agency
3. Section 201
4. On Completion of Business
5. Mutual Consent
6. Breach of Contract
7. Renunciation of Agency by Agent
8. Revocation of Authority by Principal
9. Termination of Agency by Operation of Law
10.Proper Termination
11.Termination by act of parties
12.Section 202
13.Section 203
14.Section 204
15.Section 205
16.Section 206
17.Section 207
18.Section 208
19.Section 209
20.Section 210
21.When Termination Takes Effect
22.Some Cases & Facts
23.Conclusion
24.References
 Termination of Agency

INTRODUCTION: An agent’s authority can be terminated at any time. If the trust

between the agent and principal has broken down, it is not reasonable to allow
the principal to remain at risk in any transactions that the agent might conclude
during a period of notice.

As per sections 201 to 210 of the Indian contract act 1872, an agency may come
to an end in a variety of ways:

1. Withdrawal by the agent – however, the principal cannot revoke an agency

coupled with interest to the prejudice of such interest. An agency is coupled with
interest when the agent himself has an interest in the subject-matter of the
agency, e.g., where the goods are consigned by an upcountry constituent to a
commission agent for sale, with poor to recoup himself from the sale proceeds,
the advances made by him to the principal against the security of the goods; in
such a case, the principal cannot revoke the agent’s authority till the goods are
actually sold, nor is the agency terminated by death or insanity (illustrations to
section 201);

2. By the agent renouncing the business of agency;

3. By the business of agency being completed;

4. By the principal being adjudicated insolvent (section 201).

The principal also cannot revoke the agent’s authority after it has been partly
exercised, so as to bind the principal (section 204), though he can always do so,
before such authority has been so exercised (section 203).

This has become a more difficult area as states are not consistent on the nature of
a partnership. Some states opt for the partnership as no more than an aggregate
of the natural person who have joined the firm. Others treat the partnership as a
business entity and, like a corporation, vest the partnership with a separate legal
personality. Hence, for example, in English law, a partner is the agent of the other
partners whereas, in Scots law where there is a separate personality, a partner is
the agent of the partnership. This form of agency is inherent in the status of a
partner and does not arise out of a contract of agency with a principal. The
English partnership act 1890 provides that a partner who acts within the scope of
his actual authority (express or implied) will bind the partnership when he does
anything in the ordinary course of carrying on partnership business. Even if that
implied authority has been revoked or limited, the partner will have apparent
authority unless the third party knows that the authority has been compromised.
Hence, if the partnership wishes to limit any partner’s authority, it must give
express notice of the limitation to the world. However, there would be little
substantive difference if English law was amended: partners will bind the
partnership rather than their fellow partners individually. For these purposes, the
knowledge of the partner acting will be imputed to the other partners or the firm
if a separate personality. The other partners or the firm are the principal and third
parties are entitled to assume that the principal has been informed of all relevant
information. This causes problems when one partner acts fraudulently or
carelessly and causes loss to clients of the firm. In most states, a distinction is
drawn between knowledge of the firm’s general business activities and the
confidential affairs as they affect one client. Thus, there is no imputation if the
partner is acting against the interests of the firm as a fraud. There is more likely to
be liability in tort if the partnership benefited by receiving fee income for the
work negligently performed, even if only as an aspect of the standard provisions
of vicarious liability. Whether the injured party wishes to sue the partnership or
the individual partners is usually a matter for the plaintiff since, in most
jurisdictions, their liability is joint and several. The Principal can terminate an
Agent’s authority at any time without having to give notice. If the trust between
the Agent and Principal has broken down, it is not reasonable to allow the
Principal to remain at risk in any transactions that the Agent might conclude
during a period of notice.

The relation of principal and agent can only be terminated by the act or
agreement of the parties to the agency or by operation of law. “An agency, when
shown to have existed, will be presumed to have continued, in the absence of
anything to show its termination, unless such a length of time has elapsed as
destroys the presumption”.

The agent’s duty to act on behalf of the principal comes to an end on the
termination of agency. The timeframe for termination of an agency can be
stipulated by a particular statute or instrument. In such a case, if the instrument
specifies in plain and unambiguous terms that an agency will terminate without
action on the part of the principal or agent upon the expiration of the time
specified in the instrument, the agency will in fact, terminate.

An agency contract may be cancelled on the basis of an express stipulation in the

contract. In such a case, the parties will have a right of cancellation at the will of
either party or upon the happening of a contingency or the nonperformance of
some expressed condition. However, the principal can cancel the agency contract
for any justifiable cause.

An agency contract to be performed to the principal’s satisfaction can generally

be canceled at will by the principal. Similarly, a power of attorney constituting a
mere agency may be revoked at any time, with or without cause.

A change in value of the subject matter or a change in business conditions may

terminate or suspend the agent’s authority if the agent should reasonably infer
that the principal would not consent if aware of such facts. Similarly, a change in
legal identity of, or merger by, the principal is a valid ground for termination of an
agency contract.

Termination by One Party, As a general rule, principal can terminate the agency
relationship.. The principal’s act is a revocation of authority although both parties
may have the power to terminate? Because agency is consensual relationship,
and thus neither party can be compelled to continue in the relationship

In a contract of agency, a person appoints another to act on his behalf with the
third party it is called 'Agency'. According to Section 183 of the said Act, Principal
must be competent to contract. Any person may be an agent (Section 184).
According to Section 185, in the contract of agency, consideration is not
necessary. Termination of agency means putting an end to the legal relationship
between principal and agent. Section 201 to 210 of the Contract Act 1872 lay
down the provision relating to the termination of Agency.

Termination of Agency: As above said termination of agency means

putting end to the legal relationship between principal and agent. Section 201 to
210 of the Contract Act 1872 lay down the provision relating to the termination of
Agency.

An agent is a person employed to do any act or enter into a contractual

relationship with others (third parties) on behalf of his principal. An agent acts as
a connecting link between his principal and third parties.

While representing his principal, an agent acts in the same capacity as of his
principal. An agent is authorized by his principal to act on his behalf. An agent
binds his principal legally in business transactions with third parties due to their
agency relationship.

Section 201: An agency is terminated by the principal revoking his authority,

or by the agent renouncing the business of the agency; or by the business of the
agency being completed; or by either the principal or agent dying or becoming of
unsound mind; or by the principal being adjudicated an insolvent under the
provisions of any Act for the time being in force for the relief of insolvent debtors.

From this section we can realise that,

Agency can be terminated by:

- the revoking the authority by the principal (by giving a notice); or

-the renouncing the business of agency by the agent (by giving a notice); or

- the completion of the business of agency (either agency is for a fixed term or

through fulfillment of the purpose of agency); or

-death of either principal or agent; or

-becoming unsound mind of either principal or agent; or

- principal is adjudicated as insolvent by any law.

Apart from this section, an agency may be terminated also as per section 56-

-if the subject matter is destroyed by happening of an event which is beyond

one’s control; or

-if the object of agency subsequently becomes unlawful as per any law.

A contract of agency is a species of the general contract. As such, an agency may

terminate in the same way as a contract is discharged except where the agency is
irrevocable. The relation of principal and agent can only be terminated by the act
or agreement of the parties to the agency or by operation of law. An agency may
be ended by an act of parties in any one of the following manners.

On Completion of Business:
The termination of agency on completion of business takes effect automatically
by operation of law. Neither party is required to give notice of termination. It is
even terminated after completion of work by any other party and not by agent.
According to section 201 of the Indian Contract Act an agency terminates on
completion of the business. The question whether an agency will terminate on
the completion of business is a question which will be determined on the facts
and circumstances of the case. For instance, an agency for sale of a property
terminates as soon as the sale is completed and does not continue until payment.
But, Allahabad and Calcutta High Courts have expressed a view contrary to that of
Madras High Court and have held that the agency is not terminated on
completion of sale but continues until payment of sale proceeds to the principal.
Views expressed by Allahabad and Calcutta High Court appears to be more logical
and practical than that of the Madras High Court.

Mutual Consent:
An agency may be terminated by mutual consent of the parties i.e. principal and
agent. Thus, as parties are at liberty to make any contract they please, so also
they are at liberty to unmake any contract that exists between them. Where the
parties agree to terminate their contract of agency, their relationship will come to
an end. However, the termination of the agency by mutual consent should not
prejudice third party's interest. That is, the contractual rights of the third party
with whom the agent has contracted cannot be impaired by such termination.
The third party is entitled to sue the principal irrespective of the fact that the
agency has been terminated.

Example: A appointed B, as his agent in order to collect the loan lent to C and D.
B collected the loan lent to C. Subsequently, A and B agreed to put an end to the
agency relationship between them. Here the agency is terminated.
Breach of Contract:
A breach of contract of agency also brings the agency to an end. That is, an
agency may be terminated by breach of contract.

The breach may be caused either by the principal or by the agent. But, the party
who suffers any loss due to such breach is entitled to receive compensation from
the party who causes such breach. It is also noted that such breach should not
adversely affect the interest of the third party who had made contract with the
agent. Despite, such breach the third party can sue the principal for enforcement
of a contract made with him by the agent before the breach.

Renunciation of Agency by Agent:

According to section 201 of the Indian Contract Act, an agency can be terminated
by the agent by renouncing the business of the agency. The object behind giving
such power to the agent is to protect the agent from acting against his will.
However, where an agency is created for a definite period or accomplishment of a
particular object, its renouncement by the agent will make the agent liable to
compensate the principal for any loss resulting from such renouncement. But,
where the agency is not to continue for a fixed period, the agent has right
renunciate the employment at any time by giving 'reasonable notice. It may be
made expressly or impliedly. Renunciation may be affected merely by the
abandonment of business of the agency.

Revocation of Authority by Principal:

According to section 201 of the Indian Contract Act, any agency comes to an end
when the principal revokes his authority given to the agent. The principal cannot,
therefore, be compelled to take services of agent who has turned disloyal. The
revocation equally applies where an agency is created for a fixed period. The best
mode for revocation of his authority by the principal is by giving a reasonable
notice to the agent. Notice must be given so as to give sufficient time to agent to
safeguard one’s interests.

Example: A appointed D, as his agent to purchase certain goods. Any time

before, he purchases the goods, A may revoke D’s authority.

However, the revocation of agent’s authority is subject to the

following conditions:

1. If the agent has exercised his authority partly, the principal may revoke the
agency for future acts only.

2. If the agency is created for a fixed term and if there is some sufficient cause,
the principal may revoke it before the expiry of the said term.

3. If the agency is created for a fixed period or continuous, the principal must give
a reasonable notice of revocation of agency to the agent.

4. If the agent has some interest in the subject-matter, the agency can be revoked
only when there is an express contract permitting the termination.

Case Law:
J.K. Sayani v Bright Brothers (P) Ltd AIR 1980 Mad 162.
In J.K. Sayani v Bright Brothers (P) Ltd. court was of the view that where an
agency has been created for a fixed period, compensation would have to be paid
for its premature termination, if the termination is without sufficient cause. The
revocation may be express or implied. An implied revocation can be inferred from
conduct of the principal. Where there are sub-agents appointed by the agent
termination of agent’s authority causes termination of authority of sub-agents
also.

Termination of Agency by Operation of Law:

An agency can be terminated by operation of law in any of the following cases:

1. Performance of the Contract: When the agency is for a particular object, the
agency terminates when the object is fulfilled.

2. Expiry of Time: When an agency is created for a particular period of time, it

comes to an end on the expiry of that period even if the work is not completed.

3. Death or Insanity of Either Party: The agency is terminated when the agent or
principal dies or becomes insane. On the death of either the agent or the
principal, the agency is automatically terminated because a person cannot act on
behalf of non-existent person. Thus, where a client dies, his pleader’s authority
also terminates. Similarly, the relationship between agent and principal comes to
an end when principal or agent becomes insane, for a person of unsound mind
cannot contract.
4. Insolvency of the Principal: When the principal is declared as insolvent, the
agency is terminated. This is because the insolvent is disqualified from entering
into contract in respect of his property.

5. Destruction of Subject-Matter: When the subject-matter in respect of which

agency was created has been destroyed, the agency is terminated. Thus, if an
agent is asked to sell a house, and the house is destroyed by fire, there is a
cessation of the agency.

6. Principal becoming an Alien Enemy: When the war breaks out between the
countries of the principal and the agent, the contract of agency is terminated.

7. Dissolution of a Company: When a company, whether it is of principal’s or

agent’s dissolved, the contract of agency between them comes to an end.

8. Termination of Sub-Agent’s Authority: The sub-agents authority is terminated

automatically, as and when the authority of the agent is terminated.

9. Subsequent event Rendering the Agency Unlawful: It maybe that an act is

lawful when the agency was created but if it is declared by law to be unlawful
subsequently, agency cannot continue, as that would be unlawful. An agency that
is lawful may become unlawful due to declaration of war when the principal or
agent is deemed an alien enemy.
Proper termination:

When an Agency is terminated, it affects the Principal and the Agent first. It brings
an end to the authority of the Agent regarding entering into contracts and
performance on behalf of the Principal. But, a third party entering in a contract
with the Agent without knowing about the termination will hold liable the
Principal. So, the Principal also have to send notice to related third parties to
avoid unlawful activities from the Agent. The notice should carry the actual and
constructive information regarding dissolving of the Agency.

Still termination of Agency because of Insanity of Principal has produced two

conflicting decisions and here the law stays obscure.

Case 1: Drew v Nunn 1879

A husband represented his wife to have authority to purchase goods on credit as
his Agent when he was sane. When he became insane, his wife continued to act
as his Agent and purchased goods from the same supplier on his behalf. When he
recovered sanity, he refused to pay for the goods purchased by his wife on his
account. He proposed that his insanity (although unknown to the supplier) had
terminated his wife’s authority as Agent.

Held: Insanity terminated the Agency relationship between husband and wife. but
the court esropped the husband from denying that his representation (that the
wife was his Agent) was true. So, he had to pay for the good

Case 2: Yonge v Toynbee 1910.

A client instructed the solicitors to defend an action on behalf of him who later
became insane, unknown to the solicitors.
Held: the solicitors breached the warranty of authority and they were liable to the
plaintiff (the client was not bound by what they had done – yet in Nunns Case he
continued to be liable).

Still, a formal power of attorney in tire prescribed form may continue in force
even though the Principal becomes insane according to the Enduring Powers of
Attorney Act 1985. But the law on informal Agency arrangements cannot be
altered by this procedure.

Termination by act of parties

The following acts of the parties of an Agency terminate Agency relationship.

(a) If the Agency is formed for a particular transaction or a particular time period,
the Agency is automatically terminated when the transaction or the time period
expires.

(b) Either party has the option to give a reasonable notice to the other party to
terminate the Agency. When the Principal gives the notice the termination
process is called revocation and in the Agent’s case it is called renunciation. If the
Agency is terminated by revocation or renunciation without sufficient cause, then
the harmed party from termination must be compensated by the other party.

Mutual agreement from both parties also terminates the Agency. But, in some
cases, there are some other agencies which are irrevocable. These agencies are:

(i) ‘authority coupled with an interest’ is employed to the Agent and purpose of
the Agency is to protect the Agent’s interest. Here, the Agent does not possess
the power of withdrawing authority.
(ii) the Agent’s authority has taken effect by partial performance and incurrence
of liability.

(iii) the Agency is declared irrevocable by statute. It happens when the Agent is a
power of attorney for a limited period expressed to be irrevocable, or when it is
formed under the Enduring Powers of Attorney Act 1985.

Section 202: Termination of agency is not possible where the agent has an
interest in the property of the subject matter of agency, unless there is an express
contract permitting such termination.

-In this case agent’s authority is coupled with agent’s interest in the subject
matter. And if the principal wants to terminate, it will prejudice the interest of the
agent.

Example:
(1) A has given a loan of taka 5 lakh to B. Subsequently, B directed A to sell a
land of B to any person and to take that money (5 lakh) from the sale of
land. In this case B cannot terminate the agency as A’s interest is coupled
with the authority to sell the land.

(2) A consigns 1,000 bales of cotton to B, who has made advances to him on
such cotton, and desires B to sell the cotton, and to repay himself out of
the price the amount of his own advances. A cannot revoke this authority,
nor is it terminated by his insanity or death.
Case Law:

1.Ramesh Mohan v. Raj Krishan, PLR (1984) 86 P&H 211

In Ramesh Mohan v. Raj Krishan, PLR (1984) 86 P&H 211, an irrevocable General
Power of Attorney in respect of an immovable property was executed along with
the agreement to sell, receipt of entire sale consideration and delivery of
possession. The power of attorney was later cancelled which came for
consideration before Punjab and Haryana High Court.

2.Akbarbhai Kesarbhai Sipai vs Mohanbhai Ambabhai Patel Since ... on 12

July,2019

3. Ashok Kumar Jaiswal vs Ashim Kumar Kar on 13 February, 2014

In the case of Shikha Properties Pvt Ltd versus S Bhagwant Singh & Others
reported in 74 (1998) DLT 113 and Harbans Singh versus Smt. Shanti Devi
reported in 1997 RLR 487, it has been held by the Hon'ble High Court of Delhi that
Section 202 of the contract Act would make a power of attorney executed for
consideration irrevocable. It cannot be cancelled. Section 202 of the Contract Act
provides that such an agency cannot, in the absence of an express contract, be
terminated to the prejudice of such interest.

Agency coupled with interest

Where the agent has an interest in the subject matter of agency the agency
cannot be revoked. Section 202 of the Contract Act provides that where the agent
has himself an interest in the property which forms the subject- matter of the
agency the agency cannot, in the absence of any express contract, be terminated
to the prejudice of such interest. Following must be present for application of the
doctrine of agency coupled with an interest. The interest of the agent must be an
existing interest i.e.it must exist at the time of creation of agency. a subsequent or
independent interest is of no use for this purpose. For example, where under an
agency the agent is to receive commission, the agency cannot be an agency
coupled with an interest.

Where contract prohibits revocation:

Even such an authority is revocable. The principal can revoke the authority
regardless of the fact that he had promised not to revoke it. But, such revocation
will be treated just like a breach of contract and the principal may be held liable
for arbitrary termination.

Section 203 : Except what is written in section 202, a principal may revoke his
agent’s authority at any time before the authority has been exercised by the
agent which is binding on the principal.

Case Law:

Laxmi Bhakta vs K P Gunduraj on 10 April, 2017

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 10TH DAY OF APRIL, 2017

BEFORE

THE HON'BLE MR. JUSTICE L. NARAYANA SWAMY

REGULAR FIRST APPEAL NO.1308 OF 2005

Section 204: If the agent has partly exercised the authority, in such case a
principal cannot terminate the agency.

Where the agent has partly exercised the authority and it is irrevocable with
regard to liabilities which arise from the acts performed.

Example: Mr. X appoints Mr. Y as his agent. On Mr. X’s direction, Mr. Y
purchases 100kg cereals in the name of his principal ‘Mr. X’. Now, in such a case
Mr. X cannot revoke the agency.

Revocation where authority has been partly exercised. The principal cannot
revoke the authority given to his agent after the authority has been partly
exercised, so far as regards such acts and obligations as arise from acts already
done in the agency. The principal cannot revoke the authority given to his agent
after the authority has been partly exercised, so far as regards such acts and
obligations as arise from acts already done in the agency." Illustrations

Example:

(a) A authorizes B to buy 1,000 bales of cotton on account of A and to pay for it
out of A’s moneys remaining in B’s hands. B buys 1,000 bales of cotton in his own
name, so as to make himself personally liable for the price. A cannot revoke B’s
authroty so far as regards payment for the cotton. (a) A authorizes B to buy 1,000
bales of cotton on account of A and to pay for it out of A’s moneys remaining in
B’s hands. B buys 1,000 bales of cotton in his own name, so as to make himself
personally liable for the price. A cannot revoke B’s authroty so far as regards
payment for the cotton."

Where authority is partly exercised:

Partly exercised authority is irrevocable. This principle is Incorporated in section
204 of the Indian Contract Act. The section says that the principal cannot revoke
the authority given to his agent after the authority has been partly exercised.

Case Law:

Mahesh Govindji Trivedi vs Legal Heirs Of Bhagvanji on 5 December, 2013

Section 205: If the agency is for a fixed period of time, before expiration of that
period, both principal can revoke the authority or the agent can renounce the
business of agency. But the party terminating agency must pay compensation to
the other party if there is no sufficient cause of termination.

-Sufficient cause must be proved in order to avoid paying compensation.

Example: not paying any remuneration without any reason; using bad language,
doing physical violence.

Compensation for revocation by principal, or renunciation by agent.—Where

there is an express or implied contract that the agency should be continued for
any period of time, the principal must make compensation to the agent, or the
agent to the principal, as the case may be, for any previous revocation or
renunciation of the agency without sufficient cause. —Where there is an express
or implied contract that the agency should be continued for any period of time,
the principal must make compensation to the agent, or the agent to the principal,
as the case may be, for any previous revocation or renunciation of the agency
without sufficient cause."
Case Law:

Bharat Petroleum Corporation ... vs M/S Jethanand Thakordas ... on 31 July, 1998
Equivalent citations: 2000 (1) BomCR 289

Section 206: Reasonable notice must be given by one party to the other for
termination. If no reasonable notice is given, if any party suffers damage, it must
be made good.

Case Law:
Sri. Yeddula Chinnappa Reddy vs Dr.Srishailappa A.Kasthuri on 26 April, 2017

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 26TH DAY OF APRIL, 2017

Case Law:
Viacom 18 Media Private Ltd., Mumbai Vs. Msm Discovery Pvt. Ltd.

Mumbai - Court Judgment

Section 207: Revocation or renunciation can be either express or implied.

Case Law:
Azam Khao Vs. S. Sattar

Court : Andhra Pradesh.

Reported in : AIR1978AP442
Section 208: If the principal terminates the agency, it is effective when it is
known to the agent or when it is known to third persons.

-So, termination is effective only when it is known to the agent or third persons.

When termination of agent’s authority takes effect as to agent, and as to third persons. The
termination of the authority of an agent does not, so far as regards the agent, take effect
before it becomes known to him, or, so far as regards third persons, before it becomes
known to them. The termination of the authority of an agent does not, so far as regards the
agent, take effect before it becomes known to him, or, so far as regards third persons,
before it becomes known to them."

Example: A directs B to sell goods for him and agrees to give B 5% commission
on the price fetched by the goods. A afterwards, by a letter revokes B’s authority.
B, after the letter is sent, but before he receives it, sells the goods for Rs 100. The
sale is binding on A and B is entitled to five rupees as his commission.

Case Law:
Ellammal vs Shanmugham

IN THE HIGH COURT OF JUDICATURE AT MADRAS

RESERVED ON : 11.08.2018

PRONOUNCED ON : 11.09.2018

Section 209: Special duty of an agent if the principal is dead or becomes

unsound mind

In this case of termination, the agent is bound to take all reasonable steps, on
behalf of the representatives of the late principal, for the protection and
preservation of the interests of the business which was entrusted to him.

Case Law:
R.Kumar(Deceased) vs S.Valliammal

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Section 210: Automatic termination of the authorities of all lawful sub-agents,
once the agent’s authority is terminated.

Case Law:
1. M.John Kotaiah v. A. Divakar , A.I.R. 1985 A.P. 30.

2.M. Arunachalam Vs. V. Rajaram Reddiar

Court : Chennai

Reported in : 1999(3)CTC316

Fact: There was one suit namely, O.S.No. 9 of 1983 on the file of the Sub-Court at
Cuddalore. That suit was filed to recover a sum of Rs. 96,820 made up of Rs.
49,995 towards principal and the balance sum towards interest. The suit was
decreed on merits by the learned trial Judge by judgment dated 18.10.1985.
Under the decree the plaintiff gets a sum of Rs. 46,060 only together with interest
at the rate of 6% p.a. thereon as against the claim made by him in the plaint.
Aggrieved over that portion of the claim in respect of which the plaintiff was non-
suited, the plaintiff is before this Court in A.S.No. 108 of 1986, to which the
defendant in that suit is the respondent. Aggrieved over that portion of the
decree which was passed against the defendant, the defendant is before this
court in A.S.No. 858 of 1986 as the appellant therein and the plaintiff in that suit
is the respondent in this appeal. It is the correctness of the judgment referred to
above in the original suit, that is being questioned in these two appeals. In this
order the parties to the proceedings will hereinafter be referred to as the plaintiff
and the defendant.
When Termination Takes Effect
Termination of an agency takes its effect when it becomes known to an agent.
When the principal revokes the agency, it comes into effect only when it is known
to the agent. However, in the case of third parties, termination comes into effect
only when such termination of agency comes to their knowledge.

According to Section 210 of the Indian Contract Act, 1872 termination of an

agent’s authority also terminates the sub-agents authority appointed by the
agent. A per Section 209 of Indian Contract Act, 1872 it is the duty of an agent to
protect his principal’s interest in case his principal becomes of unsound mind or
dies.

It is the duty of an agent that on the termination of an agency due to death of the
principal or his becoming insane, to take all the reasonable steps on behalf of his
late principal or dying principal to protect the interest that the latter entrusts to
him.

Some Cases & Facts:

Revocation means an offer is withdrawn by the offerer. The general rule was
established in Payne v Cave [ that an offer can be revoked at any time before
acceptance takes place. However, the revocation must be communicated
effectively directly or indirectly to the offeree before acceptance . This is
supported by Byrne v Van Tienhoven , where the withdrawal of an offer sent
by telegram was held to be communicated only when the telegram was received.
Further, sufficient communication does not need to be made by the offeree
personally but through a third party in Dickinson v Dodds . In Routledge v
Grant, the offer may still be able to withdraw even if it specifically stated that it
would remain open for a fixed period when such promise to leave an offer open
was not supported by any consideration given by the offeree. However, once the
offeree accepted the offer by post, namely, letter, the postal rule would strictly
apply and would not permit such withdrawal. Contrary, once the offer has been
accepted and acted upon, it cannot be revoked, the incompliance of it would be a
breach of contract. In Errington v Errington, where a unilateral offer was
made, the courts decided that so long as the repayments were being made by the
son and daughter-in-law, the father’s offer could not be revoked. The rationale
given by Lord Denning is that “They have acted on the promise and neither the
father nor his widow, his successor in title, can eject them in disregard of it.” In
such scenario, once the offeree relied on the offer and embarked upon it, the
offer cannot be terminated.

Conclusion:

A contract may terminate by mutual consent in any of the following ways:

a. Novation (substitution)

b. Recession (cancellation)

c. Alteration

d. By subsequent impossibility

e. By operation of law

f. By breach

12 REMEDIES FOR BREACH OF CONTRACT (SECTIONS 73-75)

• As soon as either party commits a breach of the contract, the other party
becomes entitled to any of the following reliefs: – a) Recession of the contract.
Under section 201 to 210 an agency may come to an end in a variety of ways:

(i) By the principal revoking the agency – However, principal cannot revoke an
agency coupled with interest to the prejudice of such interest. Such Agency is
coupled with interest. An agency is coupled with interest when the agent himself
has an interest in the subject-matter of the agency, e.g., where the goods are
consigned by an upcountry constituent to a commission agent for sale, with poor
to recoup himself from the sale proceeds, the advances made by him to the
principal against the security of the goods; in such a case, the principal cannot
revoke the agent’s authority till the goods are actually sold, nor is the agency
terminated by death or insanity. (Illustrations to section 201)

(ii) By the agent renouncing the business of agency;

(iii) By the business of agency being completed;

(iv ) By the principal being adjudicated insolvent (Section 201 of The Contract Act.
1872)
Reference:
1. Shits of Bahreen Khan Mam.

2. https://www.legalcrystal.com/cases/search/name:indian-contract-act-1872-
section-207

3. https://www.writinglaw.com/section-208-contract-act/

4. https://www.academia.edu/

5. www.lawyersnjurists.com

6. indiankanoon.org

7. accountlearning.com

8. www.academia.edu

9. saylordotorg.github.io

10. www.srdlawnotes.com

The End