AGENCY LAW: TERMINATION

INTRODUCTION

An agent's authority can be terminated at any time. If the trust between the agent and principal has broken down, it is not reasonable to allow the principal to remain at risk in any transaction that the agent might conclude during a period of notice. However, the termination must be as expressed in the agreement.

OBJECTIVES

The objectives of this unit are to:

1. Appreciate the ways of terminating agency agreement and 
2. Liabilities of terminating the agency agreement unlawfully. 

Ways of Ending an Agency

An agency may come to an end in a variety of ways:

• Withdrawal by the agent: however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e.g., where the goods are consigned by an upcountry constituent to a commission agent for sale, with power to recoup himself from the sale proceeds, the advances made by him to the principal against the security of the goods; in such a case, the principal cannot revoke the agent’s authority till the goods are actually sold, nor is the agency terminated by death or insanity. 
• By the agent renouncing the business of agency; 
• By the business of agency being completed; 
• By the principal being adjudicated insolvent. 
• Death or insanity 

The revocation or renunciation of an agency may be made expressly or impliedly by conduct. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them.

SELF ASSESSMENT EXERCISE 1

Explain the ways that an agency can come to an end.

Implications of Unlawful Revocation

The revocation of the agency should be as specified in the agreement and follow due process without which the culprit will be liable.

The principal also cannot revoke the agent’s authority after it has been partly exercised, so as to bind the principal, though he can always do so, before such authority has been so exercised.

Furthermore, if the agency is for a fixed period, the principal cannot terminate the agency before the time expired, except for sufficient cause. If he does, he is liable to compensate the agent for the loss caused to him thereby. The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill, continuous disobedience of lawful orders, and rude or insulting behaviour has been held to be sufficient cause for dismissal of an agent. In addition, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid.

When an agent’s authority is terminated, it operates as a termination of sub-agent also. This has become a more difficult area as countries are not consistent on the nature of a partnership. Some opt for the partnership as no more than an aggregate of the natural persons who have joined the firm. Others treat the partnership as a business entity and, like a corporation, vest the partnership with a separate legal personality. Hence, for example, in English law, a partner is the agent of the other partners whereas, in Scots law there is a separate personality, a partner is the agent of the partnership. This form of agency is inherent in the status of a partner and does not arise out of a contract of agency with a principal.


The Nigerian laws are derived from the English laws. The English Partnership Act 1890 provides that a partner who acts within the scope of his actual authority (express or implied) will bind the partnership when he does anything in the ordinary course of carrying on partnership business. Even if that implied authority has been revoked or limited, the partner will have apparent authority unless the third party knows that the authority has been compromised. Hence, if the partnership wishes to limit any partner's authority, it must give express notice of the limitation to the world. However, there would be little substantive difference if English law was amended: partners will bind the partnership rather than their fellow partners individually. For these purposes, the knowledge of the partner acting will be imputed to the other partners or the firm as a separate personality. The other partners or the firm are the principal and third parties are entitled to assume that the principal has been informed of all relevant information.

This causes problems when one partner acts fraudulently or negligently and causes loss to clients of the firm. In most countries, a distinction is drawn between knowledge of the firm's general business activities and the confidential affairs as they affect one client. Thus, there is no imputation if the partner is acting against the interests of the firm as a fraud. There is more likely to be liability in tort if the partnership benefited by receiving fee or income for the work negligently performed, even if only as an aspect of the standard provisions of vicarious liability. Whether the injured party wishes to sue the partnership or the individual partner is usually a matter for the plaintiff since, in most jurisdictions, their liability is joint and several.

SELF ASSESSMENT EXERCISE 2

• Mention some of the implications of unlawful termination of and agency. 

CONCLUSION

From the above you should have been conversant with how agency can be terminated and the liability of not following the lawful channel of revocation.