TERMINATION OF AGENT
TERMINATION OF
AGENT
Section 154 to 163 of
Contracts Act 1950 deal with the manner in which an agent’s authority may be
terminated
Sec 154 – agency is
terminated by:
- Principal revoking his authority
- Agent renouncing the business of
the agency
- Business being completed
- Death of principal or agent
- Insanity of principal or agent
- Bankruptcy of principal or agent
S. 154. 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
or declared a bankrupt or an insolvent
Sec 156 - principal may
revoke the authority given to agent at any time before the authority has been
exercised so as to bind the principal
When termination takes
effect
Sec 161 – 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 person, before it
becomes known to them
ILLUSTRATIONS
(a) A directs B to sell goods for
him, and agrees to give B 5 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 RM100.
The sale is binding on A, and B is entitled to RM5 as his commission.
(b) A, at Port Dickson, by letter directs B
to sell for him some cotton lying in a warehouse in Kelang, and afterwards,
by letter, revokes his authority to sell, and directs B to send the
cotton to Port Dickson. 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.
Two Ways of
Terminating an Agency
As mentioned
at the above a contract of agency can be terminated either :
(1) by the act of the parties, or
(2) by
operation of law.
By the Act of
the Parties
The parties
to agency, i.e., the principal and the agent, can either revoke or renounce an
authority in an agency contract. It therefore can either be:
(1) the principal revoking the
authority given, or
(2) the agent renouncing his authority.
Generally, a
principal can revoke the authority given to an agent at any time as he wishes.
The revocation can either be express or implied (section 160).
If the
principal empowers an agent to let out his house but later lets it himself, a
contract of agency is said to be revoked by implication.
Though, the
general rule stipulates that a principal can revoke the authority given to an
agent at any time as he wishes, he is not allowed to do so if:
(1) part of the job has been done, and
(2) the agent
has an interest in the contract.
Part of the
Job Has Been Done
Section 157
Contract Act 1950 reads, “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 as arise from acts already done in the agency.”
READ v ANDERSON [1884] 13 QBD
779
The principal
who was the defendant instructed the plaintiff, a turf commission agent, to
place bets on his behalf. The plaintiff placed the bets and lost. By custom, a
turf commission agent always bets in his own name and becomes solely
responsible to the person with whom the bet is made. If he is declared a
‘defaulter’ owing to his failure to pay the lost bet, he is subject to certain
disqualifications which will have a serious impact on his business.
It was held
that the defendant could not revoke the plaintiff’s authority after losing the
bet. He would have to indemnify the plaintiff for the amount which the latter
had paid to the person with whom he made the bet.
Irrevocable
Agency
An agency coupled
with an interest is a special type of agency relationship that is created for
the agent’s benefit. This type of agency is irrevocable by the principal (i.e.,
the principal cannot terminate it). An agency coupled with an interest is not
also terminated by the death or incapacity of either the principal or the
agent. It terminates only when the agent’s obligations are performed. However,
the parties can expressly agree that an agency coupled with an interest is
terminated.
Section 155
Contract Act 1950 provides, “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.”
Illustration
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, not can it be
terminated by his unsoundness of mind or death.
In SMART v
SANDERS (1848) 5 CB 895, a factor was sent goods to sell on behalf of
the principal and he made advances to the principal on the security of these
goods. Lord Atkinson in Firth v Firth [1906] AC 254 at p. 261 explained
the earlier case in the following manner, “… the general authority of a factor
in whose hands goods were placed for sale, to sell at the best price which
could reasonably be obtained, could not be revoked after the factor had made
advances on the security of the goods to the owner of them and while these
advances remained unpaid.”
Notice of
Revocation or Renunciation
Reasonable
notice must be given in either revocation or renunciation. Otherwise, the
damage thereby resulting to the principal or the agent, as the case may be,
must be made good by the party in breach to the other. (S.59)
- what would be
reasonable notice depends on the facts and circumstances of each case.
Notification
Required at the Termination of an Agency
If an agency
is terminated by the act of the parties (mutual agreement), the principal is
under a duty to give certain third parties notification of the termination.
Unless otherwise required, the notice can be from the principal or some other
source (e.g., the agent). If an agency terminates by operation of law, there is
no duty to notify third parties about the termination, however.
Termination
of an agency extinguishes an agent’s actual authority to act on the principal’s
behalf. However, if the principal fails to give the proper notice of
termination to a third party, the agent still has apparent authority to bind
the principal to contracts with these third parties. If this happens, the
contract is enforceable against the principal. The principal’s only recourse is
against the agent to recover damages caused by these unauthorized contracts.
By Operation
of Law
An agency may
also be terminated by operation of law. In other words, it will cease to exist
when one of the situations below occurs.
- Purpose achieved. An agency is
terminated when parties to contract perform their obligations.
- Lapse of time. An agency is
terminated when the time specified elapses.
- Death. An agency is terminated
upon the death of either the principal or the agent.
- Insanity. An agency is terminated
upon the insanity of either the principal or the agent.
- Bankruptcy. An agency is
terminated when the principal becomes insolvent or being declared as
bankrupt.
- Impossibility. An agency is
terminated if a situation arises that makes its fulfillment
impossible.
TERMINATION OF AGENT
Reviewed by Kamaruddin Mahmood
on
4:02:00 PTG
Rating:

Tiada ulasan: