Page 133 - DMGT102_MERCANTILE_LAWS_I

Unit 9: Law of Agency

Notes
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.
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).
9.7.2 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 ` 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.

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