What are the different ways of termination of agency ?

Section 201 mentions various modes of the termination of agency of an agent. The Section is as follows:-

“201. Termination of agency.-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.”

Agency can be terminated by the (1) act of the parties and (2) by the operation of law. Various of modes of termination of agency under these two heads are as following:-

1. Termination of Agency by Act of the Parties

(1) Termination of agency by agreement  

The relation of principal and agent like any other agreement may be terminated at any time and any stage by the mutual agreement between the principal and agent.

Also Read Irrevocable Agency

Also Read Vicarious liability of the principal

(2) Termination of agency by revocation by the principal

The principal may revoke the authority of the agent (Sec. 201) at any time before the agent has exercised his authority so as to bind the principal unless the agency is irrevocable (Sec. 203). But if the act has begun, the authority can only revoked subject to any claim which  the agent may have for breach of contract (Section 204). Where the agency is a continuous one, notice of its termination to the agent and also to the third parties is essential.

(3) Termination of agency by revocation by the agent

An agency may also be terminated by an express renunciation by the agent after giving a reasonable notice to the principal (Sec. 201)

Where there  is an express or implied contract that  the agency should be continued for a 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 (Sec. 205).

Reasonable notice must be given of such revocation or renunciation, otherwise the damage thereby resulting to the principal or the agent, as the case may , must be made good to the one by the other (Sec. 206).

Also Read Relations of Principal and Agent with Third Persons

Also Read What are the Rights of Agent and Duties of Principal

Revocation and renunciation may be expressed or may be implied in the conduct of the principal and agent respectively (Sec. 207).

For Example:-

(a) P employs A to let P his house. Afterwards P lets it himself. This is an implied revocation of A’s authority.

(b) A was appointed agent to do all acts and carry on business on behalf of P, the principal, in this absence form India. Held, apply Sec. 207, the power should be treated as impliedly revoked when P returned to India.

2. Termination of Agency by Operation of Law

(1) Termination of agency by performance of the contract

The most obvious mode of putting an end to the agency is to do what the agent has undertaken to do (Sec. 201). Where the agency is for a particular object, it is terminated when the object is accomplished or when the accomplishment of the object becomes impossible.

(2) Termination of agency by expiry time

When the agent is appointed for a fixed period of time, the agency comes to an end after the expiry of that time even if the work is not complete.

(3) Termination of agency by death and insanity

When the agent or the principal dies or becomes of unsound mind, the agency is terminated(Section 201).

When the termination thus take place, the agent must take, on behalf of the representative of his late principal, all reasonable steps for the protection and preservation of the interest entrusted to him (Section 209).

(4) Termination of agency by insolvency

Section 201 say that the insolvency of the principal puts an end to the agency though nothing is mentioned in Section 201 as regards insolvency of the agent. The insolvency of the agent, it is accepted, also terminated the agency unless the acts to be done by the agent are merely formal acts.

(5) Termination of agency by destruction of subject-matter

An agency which is created to deal with a certain subject matter comes to an end by the destruction of the subject-matter. Where, for example, an agent is employed to effect an insurance on a particular house, the agency terminates if, before the insurance is effected, the house is destroyed by fire.

(6) Termination of agency by principal becoming an alien enemy

When the agent and the principal are aliens, the contract of agency is valid so long as the countries of the principal and the agent are at peace. If war breaks out between the two countries, the contract of agency is terminated.

(7) Termination of agency by dissolution of a company

When a company, whether principal or agent is dissolved, the contract of agency with or by the company automatically comes to an end.

(8) Termination of agency by termination of sub-agent’s authority

The termination of an agent’s authority puts an end to the sub-agent’s authority (Section 210).

Also Read Provisions Relating to Sub-agent and Substituted agent under Indian Contract Act 1872

Also Read Rules of revocation of authority in agency

When termination of agent’s authority takes effect

The termination of the authority of an agent takes effect, so far as regards the agent, when it becomes known to the agent, and so far as regards the third persons, when it becomes know to them (Section 208).


(a) P directs A to sell goods for him, and agrees to give A 5 percent commission on the price fetched by the goods. P afterwards, by a letter, revokes A’s authority. After the letter is sent but before A receives it., he sells the goods for Rs. 1,000. The sale is binding on P, and A is entitled to Rs. 50 as his commission.

(b) R at Chennai, by a letter, directs A to sell for him some cotton lying in a warehouse in Bombay, and afterwards, by a letter revokes his authority to sell, and directs A to send the cotton to Chennai. A, after receiving the second letter, enters into a contract with T who knows of the first letter, but not of the second, for the sale to him of the cotton. T pays A the money, with which A absconds. T’s payment is good as against P.

The revocation of agency as regards the agent and as regards the third parties may take effect at different points of time.

If an agent knowingly enters into a contract with a third party after termination of his agency and if the third party deals with him bona fide, i.e., without knowing that his authority as agent has been terminated, the agent will bind the principal by his act.

Termination of sub-agency

The sub-agency will be terminated as soon as the main agency is terminated.

Termination of substituted agency

The authority of the substituted agent will not automatically be terminated if the authority of the agent is terminated.

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