Termination of agency by operation of law
An agency may be terminated by operation of law, under the circumstances explained below.
1. Completion of business: An agency automatically comes to an end when its business is completed. For example, A employs B to sell his goods. The authority of B to sell goods ceases to be exercisable as soon as the sale is complete.
2. Death or insanity of the Principal or Agent: An agency is terminated automatically in the event of the death of the principal or the agent, or if either becomes insane. The principal’s insanity puts an end to the agency even though the agent has no notice of it.
3. Insolvency of the Principal: The principal’s insolvency does terminate the agent’s authority. Besides, the insolvency of the agent also terminates his authority if it makes him unfit to perform his duties.
4. Expiry of Time: Where the agent is appointed for a fixed term, the agency comes to an end when the term expires (if the term of the agency was not extended), no matter the purpose of agency has been accomplished or not.
5. Destruction of the subject matter: Destruction of the subject matter of the agency automatically puts an end to it. For example, A employs someone to let his house. The house collapses in an earthquake, the agency ceases to exist.
6. Dissolution of company: Where the principal or the agent is an incorporated body (i.e, company) the agency comes to an end on dissolution of the company.
7. Upon Principal or Agent becoming an Alien Enemy: Where the principal and agent are the citizens of two different countries, their agency relationship comes to an end in the event of an outbreak of war between the two nations. The reason behind the same is simple. As a consequence of war, the principal and the agent become alien enemies to each other and the existing contract of the agency becomes unlawful.