Agency: Termination

Question 1

How can an agency relationship be terminated?

Answer 1

1) One party communicates to the other that the relationship is at an end

2) Agreement of parties: The contract between principal and agent states when it will end or upon the happening of a specified event

Question 2

Terminating Actual Authority

Answer 2

Agreement of parties (e.g., a contract between principal and agent states when it will end or upon the happening of a specified event.)

By lapse of time:
○ End of specified time, or if none, within a reasonable time
○ Any time by either party after notice

By change of circumstances that should cause A to realize P would want to terminate authority (E.g., destruction of subject matter of the authority, drastic change in business conditions, change in relevant laws.)

Fulfillment of the purpose of the agency relationship (e.g., completion of task)

By operation of law (e.g., relationship automatically terminates upon death or loss of capacity of either A or P.)

Question 3

Does Termination of Actual Authority also Terminate Apparent Authority?

Answer 3

NO. Termination of actual authority does not end any apparent authority held by A.

Apparent authority ends when it is no longer reasonable for 3rd party to believe that A continues to act with actual authority.

The test is whether 3rd party knows or reasonably should have known of the termination of A’s authority.

Question 4

When is Termination Effective

Answer 4

A renunciation or revocation is effective when the other party has notice of it.