UNIT 11

TERMINATION OF AGENCY BY ACTS OF THE PARTIES

Agency relationships can be terminated by the mutual agreement of the principal and agent or by a unilateral act of either party. See section 4 of the Contract Law of Lagos State which provides for the termination of agency by mutual agreement, revocation, and renunciation. The following are the key ways agency can be terminated by acts of the parties:

1. Mutual Agreement: This is where the principal and the agent may mutually agree to terminate the agency relationship at any time. This mutual agreement must be explicit and clear. For instance, if a principal and an agent agree that the agent's services are no longer required, the agency relationship ends immediately.
2. Revocation by Principal: This is where the principal has the right to revoke the agent's authority at any time, provided the revocation does not breach any existing contract between the principal and the agent. However, if the agency is coupled with an interest, the principal cannot revoke it without the agent's consent. See the case of Achike v. Achebe (1958) 3 FSC 26, where the court held that the principal could revoke the agency unless it was coupled with an interest.
3. Renunciation by Agent: This is where the agent may renounce the agency by giving notice to the principal. The renunciation must be communicated clearly and effectively to avoid any ambiguity. For instance, if an agent decides they no longer wish to represent the principal, they must notify the principal to effectuate the termination.
4. Completion of the Agency Purpose: this happens if the agency relationship was created for a specific purpose, the completion of that purpose terminates the agency. For example, if an agent was hired to sell a property and the property is sold, the agency relationship terminates upon the completion of the sale.
5. Expiration of Time: An agency relationship can be established for a specific period. Once this period expires, the agency relationship terminates automatically. For instance, if an agent is appointed for one year, the agency relationship ends after one year unless renewed.

TERMINATION OF AGENCY BY OPERATION OF LAW

An agency relationship can also be terminated by operation of law under certain circumstances, which do not require any act by either the principal or the agent. See section 5 of the Contract Law of Lagos State which deals with the termination of agency by operation of law, including death, insanity, and bankruptcy. The following are the key ways agency can be terminated by operation of law:

1. Death of Principal or Agent: This is where the death of either the principal or the agent automatically terminates the agency relationship. This is because the agency is a personal service relationship, and the obligations cannot be transferred to the estate of the deceased. See the case of Okoya v. Santilli (1990) 2 NWLR (Pt. 131) 172, where the court held that the death of the principal ended the agency relationship.
2. Insanity of Principal or Agent: this happens if either the principal or the agent becomes insane, the agency relationship is terminated. The insanity must be such that it affects the ability of the principal or agent to perform their respective roles. For instance, if a principal becomes legally insane, the agency relationship cannot continue as the principal is no longer capable of managing their affairs.
3. Bankruptcy of Principal: This is where the bankruptcy of the principal usually terminates the agency relationship, especially if the agency involves the management of the principal's assets. This is because the control of the principal's assets passes to a trustee in bankruptcy.
4. Frustration: This is where the agency relationship can be terminated if an event occurs which makes the performance of the agency duties impossible or illegal. For example, if a law is passed prohibiting the activity for which the agency was created, the agency relationship terminates.
5. Change in Law: A change in the law that makes the continuation of the agency relationship illegal will terminate the agency. For instance, if a new regulation is introduced that bans certain commercial activities, any agency relationship involved in those activities will end.

INCIDENCE OF TERMINATION OF AGENCY

The termination of an agency relationship has several legal implications for both the principal and the agent:

1. Notice to Third Parties: this happens upon termination, it is crucial to notify third parties who have been dealing with the agent. Failure to notify third parties can result in the principal being held liable for the agent's acts even after termination. See the case of Reynolds v. Atherton (1921) 125 LT 690, where the court held that the principal must inform third parties of the termination to avoid liability.
2. Return of Property: This is where the agent must return any property, documents, or money belonging to the principal upon termination of the agency. This includes any assets or confidential information that the agent may have acquired during the agency relationship.
3. Compensation and Indemnity: this happens if the termination breaches the terms of the contract between the principal and the agent, the party in breach may be liable for damages. For instance, if the principal revokes the agency without proper notice, the agent may be entitled to compensation for any losses suffered.
4. Accounting: This is where the agent must account for all transactions conducted on behalf of the principal up to the date of termination. This includes providing a detailed record of all dealings and any outstanding matters.
5. Confidentiality: This is where the agent's duty of confidentiality continues even after the termination of the agency relationship. The agent must not disclose any confidential information acquired during the agency relationship to third parties.

CONCLUSION

By understanding these principles, parties involved in agency relationships can effectively manage the termination process and mitigate potential legal risks.