Question: write a short note on termination of contract of Agency.

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


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Termination of agency

1.      By the act of the parties:

i.                     By Agreement: An agency can be terminated:

A.    With the mutual consent of all concern parties,

B.    If the agreement provides for the appointment of the agent for a specified period of time, or, for the specific event, the agency will come to an end automatically when that period of time expires, or assigned task is completed.

Example: If Aayush and Anish enters into an agency contract, the same can be terminated:

A.      With the shared consent of both, or

B.      If the task, for which they have created such agency, gets completed, or

C.      If the time period for which they have created such agency, came to end.


ii.                   Revocation by the principal: The Principal may revoke agency at any time by giving notice to the agent. Any word or conduct of the principal inconsistent with the continued exercise of the authority by the agent may operate as a revocation of the agency.

iii.                 Renunciation by agent: An agent is entitled to renounce his power by refusing to act or by notifying the principal that he will not act for the principal. However, any unilateral action on his part, which is against the terms of the contract, make him liable for the consequences of breech of that particular agreement, section 206 of ICA.


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2.      By Operation Of Law:

There are following manner in which agency can be terminated with the effect of operation of Law:

i.                     Death or insanity of principal or agent, Section 209 of ICA: unless the terms of the contract otherwise explicitly provides contrary expression, the contract of agency came to end on the event of insanity or death of either party.

ii.                   Insolvency of principal: An insolvent or bankrupt is a person who is unable to run the business due to Excess of liabilities over assets. In this way, if the principal becomes an insolvent, agency can be terminated.

iii.                 In the event of frustration: Agency may came to end if provisions mentioned under section 56 of ICA gets attracted, which includes but not limited to:

A.    Destruction of subject matter,

B.    If principal becomes an alien enemy etc.




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