An agency is not a permanent entity. It may be terminated in the same manner as any other contract. The termination of agency implies the end of the relationship of the principal and agent. When the power of attorney is withdrawn by the principal the agency is said to be terminated.
This may take place mainly by the act of the parties and the operation of law. The Nepal Agency Act, 2014 has no clear provisions in this regard but Nepal contact Act 2056 has mentioned provisions about the termination of the contract of agency. An agency may be terminated in any of the following ways.
- Termination of agency by acts of the parties:
- By mutual agreement: Any agency, like, any other contract, can be terminated at any time by the mutual agreement between the principal and agent.
- By Revocation: The principal is empowered to revoke his authority given to the agent before at the stage of operation. The principal terminate the agency against the right of the agent. The revocation of agent must be noticed before revoke his power.
- By renunciation: An agency may also be terminated an express renunciation by the agent because no person can be compelled to continue as agent against his will. Unless otherwise mentioned in the contract, the agent can voluntarily discontinue the agency by giving a reasonable notice to his principal. The notice is necessary to give to the principal for renunciation otherwise he is liable to compensate the loss of his principal. The agent who renounces the agency has no right to claim remuneration for his performed work.
- By completion of the work: Unless otherwise mentioned in the contract, if the agent has been appointed for the specific work and he performs his duty, the agency comes to end from the time of completion of that
b. Termination of agency by operation of law:
The agency is terminated due to application of law in some conditions. It covers the following modes.
- By expiry of time: Unless otherwise mentioned in the contract, if the agent is appointed for a fixed time, the expiration of the terms puts an end to the agency, even though the business of the agency may not have been completed.
- By death or insanity: Unless otherwise mentioned in the contract, the agency is terminated with the time of the death or insanity of the principal or the agent.
- By insolvency of the principal: Unless otherwise mentioned in the contract, if the principal is declared insolvent, the agency is automatically terminated. It is not clear in the case of insolvency of the agent under the Indian and Nepalese Contract Act. But it is accepted that the insolvency of agent also puts an end of the agency.
- By destruction of the subject matter: An agency which is created to deal with certain subject matter will be terminated by the destruction of that subject matter. For example, where the agency was created for the sale of a house if the house is destroyed by fire, the contract of agency is ended.
- By dissolution of a company: If the principal or agent is an incorporated company, the agency automatically ceased on dissolution of the company.
- Principal and agent becomes alien enemy: If the principal and agent are nationals of two different countries and a war breaks out between those two countries on such condition those parties of agency turn into alien enemy and the contract of agency is terminated.
- By change of law: Due to the change of law, if the works under the contract of agency become impossible to perform subsequently, the agency puts an end.