Contract of agency is whereby a person is bound by the principal to act, represent or speak for him in front of the third party and make decisions on behalf of the principal. A principal may hire an agent who will act as a principal and will be solely responsible for the decision he makes on the name of the principal (Mckendrick 2012,p. 5). There are three types of authority but an agency made with an agreement is an implied authority. Contract of agency can be helpful for big business official as they cannot be available anywhere, anytime.
The relationship with an agency can be terminated if the parties feel that the relationship is not going in a beneficial manner. There are various factors which can influence and terminate contract of agency it depends on the legal contract and various clauses they have signed during the agreement. According to Scottish law if the contract which has been set up for indefinite time the notice for termination of agency to be given for first year should be 1 month for second year two months and for third year 3 months prior before the termination by any of agent or the principal. There are different ways in which contract of agency can be terminated 1)Act of parties 2)Operation of law 3)By agreement. Under act of parties there can be few scenario's one is revocation by principal in which the principal no longer wants the agent to work or act for his business or premises this situation can be handled by giving a notice to an agent and the notice should also be presented to the third party. Second is renunciation by agent in which the agent no longer wishes to work for the principal and he can stop working by giving a notice. If the agent wishes to leave before the expiration of the contract compensation must be provided to the principal for breaking the clause in an agreement. Agreement is where both the parties agent and the principal decide to dissolve the agency by mutual understanding they can do so but both the principal and agent should agree and show equal interest for the closure of the business. Under Operation of Laws Contract of agency can be terminated if any one of principal or agent becomes ill or dies. If the company acting as principal or agent has been ceased, has become bank corrupt or dissolved in this case also the contract of agency may be terminated. The business being sold to another party and the agent is sacked by principal in this compensation has to be paid to the agent by the principal this can also be a reason where contract of agency maybe terminated. During the contract time period if either party is declared insane or mad with adequate medical records then the contract is termed void and contract of agency is terminated. Age is another factor which can lead to termination. If the principal sacks the agent for his age factor then agent can ask for compensation. Agents are always advised to get sacked so they can earn their compensation from the principal in case the agent resigns before the contract expiry no compensation will be paid by the principal. UK law has now agreed that 65 is the age at which the agent should retire. agreement Breach should not be done by both the parties if the agreement is broken by any party then it should not be tolerated and should call for termination of contract by either party. Fulfillment of objective for which the contract of agency was formed if the work is over for which the agency was established then the agency will automatically be terminated after the completion of the work for eg. principal appoints an agent for sale of his building after the building is sold the contract will automatically terminate. internal or external difference between the two can lead to grudge, misunderstanding or difference in opinion between the principal or an agent can lead to internal disputes. external difference can be complaints lodged by third party or the business environment issue and lead to termination of contract of agency. Expiry of time is another contract which is made for a agreed specific period of time by both the parties which after the completion of time period the contract is terminated for eg. hiring an advertising team to do a one time marketing campaign in a specific time period the contract of agency maybe terminated by mutual agreement after its done. Fraud or cheating by two parties means they have broken a major clause in the contract and will be termed under fraudulent concealment this can lead to termination of contract agency in this case the cheated party can lodge a complaint in the court and can appeal for justice from the jury. changes in the business environment or condition such as fluctuation in prices of the business for eg fall in price of land given to an agent for selling in this case agent should consult the principal and the final call should be taken by the principal whether to continue or terminate the contract. The loss made in business by unforeseen circumstances for eg a house to be sold by an agent broker catches fire this can lead to closure in deal and thus principal can call for termination of agency. In case a war breaks out between two countries and the business suffers in this case either agent or principal wants to pull out and can lead to termination of an agency. Political changes and instability in a nation can bring changes in law for eg making an act illegal which was perviously legal and principal and agent were dealing with it. This can affect the business and hence termination can take place this decision has to be taken by the principal for the closure of the business. There should be understanding between an agent and the principal so that the agent can carry out the business freely without any pressure. Contract ought to dependably be made when designating an agent this will help later if there is any legal pressure between the two. On the off chance that agent following up on the name of principal is doing a reasonable job then there ought not be reason to terminate him yet in an event that the principal needs to terminate him and bring a change if agent feels bamboozled he can appeal to the court and can request justice for this situation recompense must be paid by the principal. Notice of termination should be given before the time period allotted by the law for both agent or the principal but according to UK law even if the notice is provided before time agent is eligible to receive some compensation amount but if agent has broken the contract or misconducted his duties in that case no recompense will be paid.
The principal and agent should try to sought the internal problems if possible as trust is the biggest binding factor in a business. So these scenario lead to few ways in which contract of agency maybe terminated.