Termination Of Agency (Section 201 – 210 of Indian Contract Act, 1872)

Termination Of Agency (Section 201 – 210 of Indian Contract Act, 1872)

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

Section 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.

Various modes of the termination of agency as provided in this Section are as follows:

  • By revocation of agent’s authority
  • By renunciation of the business of agency by the agent
  • By the completion of the business of agency
  • By the death or insanity of either the principal or the agent
  • By insolvency of the principal

Rules Of Revocation Of Authority:

It has been noted above that one of the modes of the termination of agency is the revocation of agent’s authority by the Principal.

The revocation of agent’s authority can be made by the principal subject to the following rules.

1)Revocation may be express or implied (Section 207)

According to Section 207, revocation of agency may be either expressed or implied in the conduct of the principal.

For example,  A empowers B to let A’s house. Afterwards, A lets it himself. This is an implied revocation of B’s authority.

In R.D. Saxena v. Balaram Prasad Sharma, the Apex Court said that the right of the litigant was to be read as the corresponding counterpart of the professional duty of the advocate.

2) No Revocation Of Agency When Agent Has Interest In The Subject-matter (Section 202):

According to Section 202

“When the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest”.

When the authority of an agent is “coupled with interest”, the authority conferred on the agent cannot be revoked to the prejudice of the agent’s interest.

This is however, subject to an express contract to the contrary. The following illustrations attached to Section 202 explain the provision.

Whether the agency can be revoked by the principal or not depends on the fact whether agency creates an interest in favour of the agent or not.

If no such interest has, in fact, been created, mere assertion in the contract that the power of attorney is irrevocable is not enough.

Even if it has been described as irrevocable, the agency may still be revokes, if no interest has been created in favour of the agent.

In Bhagwanbhai Karamanbhai v. Arogaynagar Co-op. Hsg. Socy. Ltd., irrevocable power of attorney was executed by all land owners for sale of land.

Landowners had also parted with their power in favour of power of attorney holder. The Gujarat High Court held that on the death of one of the landowners, there was no need for power of attorney holder to obtain consent from heirs and legal representatives of deceased landowners, because there was no express contract for the termination of agency.

3) Revocation Possible Before The Authority Has Been Exercised (Section 203):

According to Section 203, the principal may, save as otherwise provided by the last preceding Section revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal.

It means that when the agent has already exercised the authority conferred upon him by the principal, the revocation of the same is not possible.

Revocation When Authority Has Been Partly Exercise (Section 204)

When the authority has been partly exercise by the agent, there can be no revocation of agency as regards such acts and obligations as arise from the acts already done. The provision in this regard is contained in Section 204, which is as under

“204. Revocation where authority has been partly exercised. – The Principal cannot revoke the authority given too 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.

4) Principal To Compensate, If There Is Premature Revocation Without Justification (Section 205)

When the agency has been created for a fixed time by an express or implied contract, its premature revocation by the principal will make him liable towards the agent, unless the revocation has been made with any sufficient cause. Section 205 makes the following provision in this regard.

“205. 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.

5) Principal Should Give Reasonable Notice Of Revocation (Section 206)

According to Section 206, when the principal having justification to do so revokes the authority, he must give reasonable notice of such revocation to the agent, otherwise he can be made liable to make good any damage which may be caused to the agent.

In re M/s. Om Prakash pariwal, the petitioners were appointed the Storing Agent of Food Corporation of India.

6) Termination Of Agency Terminates Sub-Agency Also (Section 210)

According to Section 210, the termination of the authority of an agent causes the termination of the authority of all sub-agents appointed by him.

7) Agent’s Duty On Termination Of Agency By Principal’s Death Or Insanity (Section 209)

When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

8) Time From Which The Termination Of Agent’s Authority Becomes Effective (Section 208)

According to Section 208, “the termination of the authority of an agent does not, so far as regards the agents, take effect before it becomes known to him, so far as regards third persons, before it becomes known to them”

The Termination of the agency does not become effective immediately. It take effect

  • against the agent, when the fact of termination becomes known to him
  • against third persons, when it becomes known to them

Renunciation of Agency By The Agent

As the principal can revoke the agent’s authority, so also the agent can renounce the agency. Section 206 requires that the agent must give his principal reasonable notice of renunciation otherwise he will be liable to make good any damage caused to the Principal for want of such notice.

Section 207 further mentions that like revocation, the renunciation may also be express or may be implied in the conduct of the agent.

Where, however, there is a contract that the agency should be continued for any fixed period, and the agent makes renunciation, without any sufficient cause, prior or the expiry of the stipulated time, he must compensate the principal for any loss caused to him by the premature renunciation.

Author: R. Shanmuga Sundaram,
Student - Chettinad School of Law

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