2/2/24, 5:05 PM Understanding Contract of Agency

Termination of Agency
Termination of agency is addressed in Section 201 of the Indian Contract Act. The principal revoking his
authority; the agent renouncing the agency's business; the agency's business being completed; or either the
principal or agent dying or becoming of unsound mind; or the principal being adjudicated an insolvent under
the provisions of any Act for the time being in force for the relief of insolvent debtors; or the principal being
adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent
debtors. (Siman, 2019)

Following the various ways in which an agency can be terminated:

1. Termination of agency is discussed in Section 202 of the Indian Contract Act when the agent has an
interest in the subject-matter. In the absence of an express contract, the agency cannot be dissolved to
the detriment of the agent's personal interest in the property that is the subject-matter of the agency.
For example: A gives B permission to sell A's land and use the revenues to pay himself the obligations
owed to him by A. This authority cannot be revoked, nor can it be terminated by his insanity or death.

2. When the principal may revoke the agent's, authority is discussed under Section 203 of the Indian
Contract Act. Except as specified in the preceding section, the principal may revoke the authority
entrusted to his agent at any moment before the authority has been exercised to bind the principle.

3. Section 204 of Indian Contract Act talks about revocation of authority where it has only been partially
exercised.
The principal cannot revoke his agent's authority after it has been partially exercised in terms of acts and
duties arising from acts already performed in the agency. For example: A allows B to purchase 1,000
bales of cotton on behalf of A and pay for them using A's funds still in B's possession. B purchases 1,000
cotton bales in his own name.

4. Compensation for cancellation by principal or renunciation by agent is discussed under Section 205 of
the Indian Contract Act. If the agency is to be prolonged for any period, the principal must compensate
the agent, or the agent must compensate the principal for any earlier revocation or renunciation of the
agency without good cause.

5. Notice of revocation or renunciation is discussed under Section 206 of the Indian Contract Act. A
reasonable notice of such revocation or renunciation must be given, or else the damage caused to the
principal or agent must be made good by the other.

6. Revocation and renunciation may be declared or implied, according to Section 207 of the Indian Contract
Act. Revocation and renunciation can be explicit or implied in the principal's or agent's behavior,
respectively. For example: A authorises B to rent A's home. After that, A lets it go on his own. This implies
that B's authority has been revoked.

7. Section 208 of the Indian Contract Act discusses when the termination of an agent's authority takes
effect as to the agent and as to third parties. The termination of an agent's authority has no effect on the
agent before it is known to him, or on third parties before it is known to them. For example: By letter, A
tells B to sell some cotton stored in a warehouse in Bombay for him, and then, by letter, revokes his right
to sell and directs B to send the cotton to Madras. After receiving the second letter, B enters a contract
with C, who is aware of the first but unaware of the second, for the sale of cotton to him. C gives B the
money, with which B flees. C's payment is superior to A's.

8. Section 209 of the Indian Contract Act discusses the agent's obligation upon termination of agency due
to the principal's death or insanity. When an agency is ended due to the principal's death or incapacity,
the agent is obligated to take all reasonable means for the protection and preservation of the interests
entrusted to him on behalf of the late principal's representatives.

9. Section 210 of the Indian Contract Act addresses the termination of a sub-authority. agent's The
termination of an agent's authority results in the termination of the authority of all sub-agents
designated by him (subject to the regulations stated herein about the termination of an agent's

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