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.

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