Termination of agency may take place in two ways either by the operation of law or by the act of parties.
Termination of agency by the operation of law. The following are the situations where the agency is terminated by the operation of law.
- Expiry of time: At times contract of agency may get formed for a particular period. In such a case after expiry of that agreed period, termination of agency takes place.
- Fulfillment of object: At times the contract of agency may be found for a particular objective or to do a particular venture. In such a case termination of agency takes place after completion of that venture.
- Death or lunacy of either party: Whenever principal or agent come across death or lunacy, agency contract gets terminated.
- Insolvency of Principal: Principal should have capacity to contract. When principal becomes insolvent, He foregoes capacity to contract and termination of agency takes place. But the act is silent with regard to insolvency of agent. As minor also can act as agent, it can be conformed that insolvent person may act as agent.
- Destruction of subject matter: When subject matter of contract gets destructed, agency contract comes to an end.
- Principal – Alien Enemy: When principal is alien and war breaks out between the countries, then principal becomes alien enemy and agency contract gets terminated.
- Liquidation of company: On account of legal entity company may act either as principal or agent. Whatever the status may be, if company enters into liquidation, termination of agency takes place.
- Termination of Sub-agency: When ever man agency gets terminated on account of any reason, sub-agency also goes off.
Termination of agency by the act of Parties. The following are the situations where the agency is terminated by the act of parties.
- Termination of agency by the Principal: Principal can terminate the contract of agency by giving notice to agent. By doing so if agent comes across any suffering. Principal has to compensate the agent.
- Termination of agency by the Agent: Agent also can terminate the agency contract by giving notice to principal but by doing so if principal comes across any suffering, agent has to compensate.
- Termination of agency by both the parties to the contract: By means of mutual understanding between principal and agent, the contract of agency may come to an end.