Termination of Agency- By Dr,Lailoona Jawed
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  • 1. Dr. Lailoona Jawed BM-25536
  • 2. Termination of Agency
  • 3. An Agency may be terminated in any of the following ways.
  • 4. Agreement Law allows termination when both the Principal and agent are agreed. Example: A employed B and signed a contract of Agency for 1 year. Agent B and A decided with mutual understanding to demolish this contract. Law allows such termination when both the Principal and agent are agreed.
  • 5. Revocation By Principal The Principal reserves the right and can terminate the contract with Agent any time, but till that time his liabilities will remain intact and termination will be considered only for future. In continuous type of contract the Principal must have to fulfill all his responsibilities required for termination by law or written on contract letter. He has to serve, legal notice should be given to Agent with or without reason (depends on nature of business and condition mentioned on contract of employment. He (Principal) must have to serve notice as stated and has to pay dues and other liability on him.
  • 6. Example: A was agent of principal B decided to terminate the agency before time and for this served a notice one month before. B according to the agreement also mentioned a genuine reason and also provided opportunity for compensating any legal claim of agent on principal. This termination will be considered as legal.
  • 7. Revocation by Agent This is the right that under legal frame an Agent can revoke the contract. But for this he has to follow and fulfill all the condition set at the time of agreement. He has to submit an application of resignation to a considerable period before that actual date of revocation other wise the Principal reserves the right of demanding any loss thereby.
  • 8. Example: If A is an agent and B is principal and A wants terminates his status as agent with B, according to the agreement the served the notice to his principal one month before and offered him to conduct audit and enquiry for providing him clearance, after one month the agent can comfortably resign
  • 9. Completion of Business Some agencies are engaged for specific task or a component of actual job. After finishing that component, business the contract automatically is terminated. This type is common in a Project type of work. Example: The agency automatically terminates on completion of a construction of a building , between a builder(agent) and proprietor(principal).
  • 10. Expiry of Time Termination of an agency takes place if a contract is made for predefined fixed period of time. The agency automatically gets terminated on expiry of that period no matter the work is been completed or not. Example: JAICA international launched a project in Pakistan for developing HIS ,the project director as a principal made contract with many agents responsible for doing various types of activities related to the project. This project was supposed to be for one year which expires on 31st December of that year on 1st of January of next the legality of all the contracts were lost.
  • 11. Death of Principal or Agent In case of the death of either principal or agent the contract of agency becomes null and void at the same moment. Example: A appointed B as an agent for one year during the year, A or B who so ever is died the contract will be terminated for future .
  • 12. Insanity of Principal or Agent Same as mentioned above instead death if agent or principal who so ever becomes insane the contract is terminated for future. Example: A and B were principal and agent respectively for one year if wither A or B becomes insane the contract is terminated
  • 13. Insolvency of Principal The agency is terminated by the insolvency of the principal since an agent is more connecting link with the third parties his insolvency may not terminates the agency in some cases Example: A appoint B as an agent for two years, B becomes insolvent after six months the agency comes to an end
  • 14. Destruction of Subject Matter The agency terminates on the destruction of subject matter of the contract of agency Example: B appoints C to sale his car, but the car is ceased on default of A, agency is terminated automatically.
  • 15. On becoming Alien Enemy If the principal and agent is in a contract of agency find themselves in a condition or situation that by any mean they cannot deal or depend on each other, reason related to something not under control of them the agency will be terminated Example: Ranjit Singh was agent of Mansha group in Amritsar of India for looking after the business of export of tomato and onion. Mean while the conflict at the border made the transportation impossible so the enmity of the two countries made the agency almost impossible so it will consider as terminated.
  • 16. Change of Law If the law changes and previously under a contract of agency and the principal the dealing was going on now it will not be, as the act which was legal before is not becomes illegal due to new imposed law. Example: Ranjit Singh was agent of Mansha group in Amritsar of India for looking after the business of export of tomato and onion
  • 17. Rights & Duties Of Principal & Agent
  • 18. Rights Of Agents: • Right of retain : The agent has a right to retain, out of any sums received all money due to him in respect of remuneration, advance made, expenses incurred in conducting business. • Right to receive remuneration : It’s a right to receive remuneration if he has completed his task. He is not entitled to any remuneration for part transaction.
  • 19. • Right of lien : He has right to exercise particular lien over the goods, paper, property until the amount due to him for commission, expenses has been paid. • Right to be indemnified for lawful acts: An agent has the right to be indemnified against the consequences of all lawful acts done by him in exercise of the authority conferred to him. However he cannot be indemnified against any unlawful acts done by him.
  • 20. • Right to be indemnified for acts in good faith: Where one person employs another to do an act and the agent does an act in good faith, the employer is liable to indemnify the agent against the consequences of that act. Though it causes an injury to the rights of third persons.
  • 21. • Right to compensation for injury: An agent has the right to compensate against the injuries caused to him due to the principal’s neglect or want or skill. • Right of stoppage of goods: An agent has the right to stop the goods in transit to the principal like an unpaid seller, if he has bought the goods with his own money and the principal become insolvent
  • 22. Duties Of An Agent: • Duties to follow direction or customs: The agent is bound to conduct the business of agency according to the directions of principal. If the principal does not give any direction then, he should follow the custom of trade. • Duty to work with reasonable skill: The agent must act with reasonable skill and diligence. It means that skill can be possessed by the ordinary men.
  • 23. • Duty to render accounts: An agent is bound to render proper accounts to his principal on demand is the duty of an agent to keep true accounts regarding all the property or money belonging to his principal he should also produce them on principal’s demand. • Duty to communicate: It is the duty of an agent, in case of difficult, to use reasonable diligence in communicating with his principal and in seeking to obtain his instruction.
  • 24. • Duty on termination of agency: When an agency terminates due to the death or insanity of principal, the agent must take reasonable step for the protection of his legal interest. • Duty not to deal on his own account: If an agent deal on his account during agency without principal’s permission, the principal pay reject the transaction. The principal may claim default caused by agent.
  • 25. • Duty not to make secret profit: An agent should make any secret profit out of the agency if the agent earns any secret profit the principal can recover it from the agent. The principal may terminate or stop the commission of agent. • Duty to pay sum received: Any amount that an agent received on behalf of principal, it should be delivered to principal, he may deduct his remuneration or expenses.
  • 26. • Duty not to delegate authority: An agent must perform the work of agency himself ,he must not delegate the authority to another person. There are few exemptions which are as follows: • When the principal has permitted to delegate authority • When by ordinary custom of trade, a sub agent can be appointed • When the nature of agency make this necessary • When an emergency arises which permits the condition of subagent
  • 27. Rights Of Principal • Right to recover damages: If the principal suffers any loss he has the right to recover from his agent. • Right to obtain secret profit: Principal has the right to recover any secret profit made by agent without the knowledge of principal debtor. • Right to refuse to indemnify agents: If the principal shows that the agent has acted as a principal himself and not as agent, he has the right to refuse to indemnify the agent against the loss caused to him.
  • 28. Duties Of Principal • Duty to be indemnify for lawful acts: it is the duty of principal to compensate an agent against the damages caused to him by the consequences of all lawful acts done by him in exercise of the authority conferred to him. However he cannot be indemnified against any unlawful acts done by him.
  • 29. • Duty to indemnify for acts in good faith: It is the duty of principal to indemnify the agent does an act in good faith, the employer is liable to indemnify the agent against the consequences of that act. Though it causes an injury to the rights of third persons.
  • 30. • Duty to compensate for injury due to his neglect: A principal must compensate against the injuries caused to agent due to the principal’s neglect or want. • Duty to pay remuneration and dues: It is the duty of principal to pay the agent all of his dues. Remuneration and commission and all the expense incurred by him should be reimbursed in case of authority