Page 128 - DCOM103_COMMERCIAL_LAW

Unit 12: Law of Agency

Notes

Task “A” consigned goods by Railways. The consignment, at the time of delivery,

was found damaged. After obtaining a certificate of damages from the Railway Offi cer, A
claimed from the Railways compensation of ` 2,300. The general Manager of the Railways
sent him a cheque for ` 1,300 in full and final settlement. The cheque was encashed, but

after a lapse of sometime. A claimed that the payment had satisfied only a part of his claim

and demanded payment of the balance. Discuss the claim of A for payment of the balance
amount.

12.7 Termination of Agency

An agent’s authority can be terminated any time. It is terminated by insanity of either party by
bankruptcy and by the destruction of subject matter.

Circumstances under which Agency Terminates or Comes to an End

Agency may be terminate by the principle and agent such as: (1) On revocation by the principal,
(2) On the expiry of fixed period of time, (3) On the performance of the specifi c purpose,

(4) Insanity or death of the principal or agent, (5) Insolvency of the principal, (6) By renunciation
of agency by the agent.

1. On revocation by the principal: The principal may, by notice, revoke the authority of the
agent at any time. Where the agent is appointed to do a single act, agency may be revoked
any time before the commencement of the act. In case of a continuous agency, notice of
revocation is essential to the agent as well as to the third parties who have acted on the
agency with the knowledge of the principal.
Where agency is for a fixed period of time and the contract of agency is revoked without

sufficient cause, compensation must be paid to the agent (s.205). However, the agency is

irrevocable in two cases: (i) Where the authority of the agent is one coupled with interest;
i.e., the agent has an interest in the subject-matter of the contract. The principal cannot
revoke the authority given to his agent after the authority has been partly exercised so far
as regards such acts and obligations already done in the agency (s.204).

Examples: (i) 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.
(ii) 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 to pay for the
cotton.
(iii) A authorizes B to buy 1,000 bags of rice on account of A and to pay for it out of A’s
money remaining in B’’s hands. B buys 1,000 bags of rice in A’s name, so as not to make
himself personally liable for the price. A can revoke B’s authority to pay for the rice.

2. On the expiry of fixed period of time: When the agency is for a fixed period of time, it comes

to an end on the expiry of that time.

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