Termination of agency

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Termination of agency

Unread postby Admin » Thu Mar 10, 2016 7:41 pm

Termination of agency.
Under section 201 of Contract Act 1872 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.

Termination of agency where agent has an interest in subject matter.
Under section 202 of Contract Act 1872 Where 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.

Illustrations

(a)A gives authority to B to sell A’s land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.

(b)A consigns 1,000 bales of cotton to B, who bas made advances to him on such cotton, and desires B to sell the cotton, and to repay himself, out of the price, the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death.

When principal may revoke agent’s authority.
Under section 203 of Contract Act 1872The principal may, save as is 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.

Revocation where authority has been partly exercised.
Under section 204 of Contract Act 1872The principal cannot revoke the authority given to 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.

Illustrations

(a)A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A’s money remaining in B’s hands. B buys 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B’s authority so far as regards payment for the cotton.

(b)A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A’s moneys remaining in B’s hands. B buys 1,000 bales of cotton in A’s name and so as not to render himself personally liable for the price. A can revoke B’s authority to pay for the cotton.

Compensation for revocation by principal or renunciation by agent.
Under section 205 of Contract Act 1872Where 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.

Notice of revocation or renunciation.
Under section 206 of Contract Act 1872 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 be, must be made good to the one by the other.

Revocation and renunciation may be expressed or implied.
Under section 207 of Contract Act 1872 Revocation and renunciation may be expressed or may be implied in the conduct of the principal or agent respec­tively.
Illustration
A empowers B to let A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority.

When termination of agent’s authority takes effect as to agent, and as to third persons.
Under section 208 of Contract Act 1872 The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.

Illustrations

(a) A directs B to sell goods for him, and agrees to give B five per cent commission on the price fetched by the goods. A afterwards, by letter revokes B’s, authority. B, after the letter is sent, but before he receives it sells the goods for 100 rupees. The sale is binding on A, and B is entitled to five rupees as his commission.

(b) A, at 1[Quetta], by letter, directs B to sell for him some cotton lying in a warehouse in 2[Karachi], and afterwards, by letter, revokes his authority to sell, and directs B to send the cotton to 1[Quetta]. B, after receiving the second letter, enters into a contract with C, who knows of the first letter, but not of the second, for the sale to him of the cotton. C pays B the money, with which B absconds. C’s payment is good as against A.

(c) A directs B, his agent, to pay certain money to C. A dies, and D takes out probate to his will. B, after A’s death, but before hearing of it, pays the money to C. The payment is good as against D, the executor.

Agent’s duty on termination of agency by principal’s death or insanity.
Under section 209 of Contract Act 1872 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.

Termination of sub-agent’s authority.
Under section 210 of Contract Act 1872The termination of the authority of an agent causes the termination (subject to the rules herein contained regarding the termination of an agent’s authority) of the authority of all sub­ agents appointed by him.

Agent’s Duty to Principal

Agent’s duty in conducting principal’s business,
Under section 211 of Contract Act 1872 An agent is bound to conduct the business of his prin­cipal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it.

Illustrations

(a) A, an agent engaged in carrying on for B a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, omits to make such investment. A must make good to B the interest usually obtained by such investments.

(b) B, a broker, in whose business it is not the custom to sell on credit, sells goods of A on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make good the loss to A.

Skill and diligence required from agent.
Under section 212 of Contract Act 1872An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct.

Illustrations

(a) A, a merchant in 1[Islamabad], has an agent, B, in London to whom a sum of money is paid on A’s account, with orders to remit. B retains the money for a considerable time. A, in and consequence of not receiving the money, becomes insolvent. B is liable for the money and interest from the day on which it ought to have been paid, according to the usual rate, and for any further direct loss-as e.g., by variation of rate of exchange-but not further.

(b) A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual enquiries as to the solvency of B, B, at the time of such sale, is insolvent. A must make com­pensation to his principal in respect of any loss thereby sustained.

(c) A, an insurance-broker employed by B to effect an insurance on a ship, omits to see that the usual clauses are inserted in the policy. The ship is after­wards lost. In consequence of the omission of the clauses nothing can be re­covered from the underwriters. A is bound to make good the loss to B.

(d) A, a merchant in England, directs B, his agent at 2[Karachi] who ac­cepts the agency, to send him 100 bales of cotton by a certain ship. B, having it in his power to send the cotton, omits to do so. The ship arrives safely in England. Soon after her arrival the price ot cotton rises. B is bound to make good to A the profit which he might have made by the 100 bales of cotton at the time the ship arrived, but not any profit he might have made by the subsequent rise.
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