Page 129 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes 3. On the performance of the specifi c purpose: Where agent is appointed to do a particular act,
agency terminates when that act is done or when the performance becomes impossible.
4. Insanity or death of the principal or agent: Death or insanity of the principal or the agent
terminates the agency. But, agent, in such a case, should take all reasonable steps for the
preservation of property, on behalf of the legal representatives of the principal (s.209).
5. An agency shall also terminate in case the subject matter is either destroyed or rendered
unlawful.
6. Insolvency of the principal: Insolvency of the principal, not of the agent, terminates the
agency.
7. By renunciation of agency by the agent: If principal can cause termination of agency by
revocation, agent may renounce his agency by giving a sufficient notice to that effect.

Where, however, agency is for a fixed period and the agency is renounced without a

sufficient cause, the principal must be compensated (s.205).
When Termination of Agency takes Effect?

1. The termination of the authority of agent does not, so far as regard the agent, takes effect
before it becomes known to him (s.208).
2. As regards third parties, they can continue to deal with the agent till they come to know of
the termination of the authority (s.208).

Examples: (i) A directs B to sell goods for him and agrees to give B 5% commission
on the price fetched by the goods. A afterwards, by a letter revokes B’s authority. B, after
the letter is sent, but before he receives it, sells the goods for Rs 100. The sale is binding on
A and B is entitled to five rupees as his commission.

(ii) A, at Chennai, by a letter directs B to sell for him some cotton lying in a warehouse in
Mumbai and afterwards, by another letter, revokes his authority to sell and directs B to
send the cotton to Chennai. 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.
(iii) 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.
3. The termination of the authority of agent causes the termination of authority of all sub-
agents appointed by him.

Task P employs A as his agent to sell 100 bags of sugar and directs him to sell at a
price not less than ` 120 per bag. A sells the entire quantity at ` 110 per bag whereas the
market rate on the date of sale was ` 115 per bag. Is P entitled to any damages and if so,
at what rate?

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