Commercial Law
April 20, 2018
Termination of Agency
By Performance
In
cases where an agent is given an authority to accomplish or achieve a specific
result reason demands that the authority terminates upon the object of the
power being accomplished. Generally, there are some or difficulties that can be
identified with regard to the practical
operation of this method of agency determination.
Firstly,
there may be some initially difficulty of ascertaining the point in time when
an agent’s authority ceased or has been executed. An example is the authority of an estate
agent.
Secondly,
it may be possible for the express or implied authority of an agent to have
ceased while his apparent or ostensible authority continues. In this situation,
an agent may validly assert his apparent or ostensible authority when his
express or implied authority has been fully executed. In such circumstances,
the agency under which he was exercising express or implied authority might
have terminated. In its place, an agency of estoppel might have been created or
subsisting. Such apparent or ostensible authority or agency by estoppel would
cease or terminate, as the case may be, whether by performance, revocation or
renunciation in the ordinary way.
By Lapse of Time
It
is also generally expected that the authority of an agent which was conferred
on him for a specific period of time terminates or ceases automatically upon
the expiration of that period of time. The agency relationship terminates at
the expiration of such period of time irrespective of whether the task or
object contemplated by its creation or formation has been accomplished or not. Where
no time is specified or agreed upon by the parties in their agency arrangement,
a reasonable time is implied by the parties and
the authority terminates at the
expiration of such reasonable time or period. What constitutes a reasonable
time or period depends upon the facts and the surrounding circumstances of the
particular case.
The
period of time may also be fixed or agreed to by the parties to the agency
arrangement or implied into their relationship by custom
or usage of the particular trade, business or profession to which the
agent belongs or profession to which the agent belongs or in which he or she
operates. It can also be presumed from the nature and circumstances of the
agency itself or the authority given or granted to the agent.
By Frustration
Where
an agency agreement exists between the principal and the agent, it may be
terminated by the operation of the doctrine of frustration. This doctrine
operates in situations when two people enter into a contract of agency which is
dependent for the possibility of its performance on the continued existence or
availability of a specific thing or matter.
When the subject matter comes to an end by reason of circumstances
beyond the control of the parties, that contract of agency is regarded as prima
facie dissolved.
An
agency relationship will automatically terminate if its object or subject
matter or the authority of the agent;
a.
becomes unlawful or illegal.
b.
ceases to exist by reason of
government expropriation or compulsory acquisition or requisition.
c.
the principal or agent becomes an
alien enemy.
d.
impossible to be executed or to be
executed strictly in accordance with the arrangement between the principal and
the agent.
By Death of Principal or Agent
Death
is inevitable to every living being ordinarily. Save in cases of irrevocable
authority, the death of a principal or agent terminates the agency relationship
unless there is an express or implied stipulation to the contrary in their arrangement.
In Phillips V Jones (1888)4 T.L.R. 401, It was held that the
authority of a broker, express or implied, terminated on the death of the
principal. The
effect of the death of the principal is that it deprives the agent of that person for whom or on behalf of whom he
should act while the death of the agent deprives the principal of
the person through whom he should act.
Where
the principal or agent is a limited liability company, an agency relationship
to which they are parties terminates upon the dissolution of the company. In Nzom & Anor V Jinadu (1987)1 N.W.L.R.
533, the Supreme Court held that a dead person ceases to have legal
personality from the date of his death and as such can neither sue nor be sued
either personally or in representative capacity.
In
essence, termination of agency relationship by death of the principal or agent is automatic. It does not depend on
the principal or agent and indeed on any other party involved, acquiring
knowledge or receiving notices of such death of the deceased party.
Where
the death takes the form of dissolution of a limited liability company, the
principal or agent’s knowledge of the fact is necessary to effect the
termination. Any transaction by the agent after the termination by the death of
the principal is not binding on the latter, his personal representation or his
estate.
By Insanity of Principal or Agent
One
of the basic ingredients of a valid contract is that the parties to such an
agreement must be of sound mind. In an agency situation, this rule is also
applicable and where the insanity or mental incapacity of the principal or the
agent occurs, the relationship is terminated except in cases of irrevocable
authority.
In
Drew V Nunn (1879)4 A.B. 661, the
defendant had given his wife authority to deal with the plaintiff, who was a
trades man, and had held her out as his agent and as entitled to pledge his
credit. The defendant became insane shortly afterwards and while his insanity
lasted, his wife ordered goods from the plaintiff, who accordingly supplied
them. At the time of supplying the goods, the plaintiff was not aware that the
defendant had become insane. The defendant afterwards recovered and then
refused to pay for the goods supplied to his wife by the plaintiff. It was held
that the defendant was liable for the price of the goods supplied to his wife
during the period of his insanity.
This
decision would have been otherwise but for the fact that there appears to be in
existence the wife’s agency of necessity which apparently was not determined by
the supervising insanity of the husband.
The
incidence of knowledge or notice of insanity or mental incapacity of a party
appears to be apparent in various judicial decisions.
An
authority may be given to an agent who has been determined without his
knowledge by insanity of the principal. If the agent in the principal, and
subsequently, the agent in the belief that he was acting in pursuance thereof
made a contract or transacted some business with another representing that in
so doing, he was acting on behalf of the principal; the agent is liable as
having impliedly warranted the existence of the authority which he assumed to
exercise to that other person, in respect of damages occasioned to him by
reason of the non-existence of that authority. In Younge V Tonybee (1910)1 K.B.
215 it was held that a solicitor was
liable for breach of warranty of authority when without knowledge he continued
with the litigation for a client, who had in the meantime become insane.
By Bankruptcy of Principal or Agent
The
agency relationship of principal and agent ordinarily terminates at the
bankruptcy of either the principal or agent. Where the principal becomes
bankrupt his estate by law falls to be administered by his trustee in
bankruptcy.
The
effect of this is that the authority of an agent appointed by him automatically
terminates for a different principal is created in the trustee in bankruptcy.
The new principal may however re-appoint the agent but until he does so the
authority of the agent in respect of the original principal is assumed to have
lapse.
Where
the new principal re-appoints the agent, a
new agency relationship is
thereby constituted in which the parties are the trustees in bankruptcy and the
original agent.
