TERMINATION OF

AGENCY
SECTION 154 – 163 OF CA 1950
 TERMINATION OF AGENCY
AGREEMENT ACT OF PARTIES

PERFORMANCE REVOCATION RENUNCIATION

Expiry of the Period Fixed in

NOTICE the Contract of Agency FRUSTRATION

OPERATION OF
LAW
 TERMINATION BY AGREEMENT
■ On the basis that an agency relationship is created by agreement between the
principal and the agent, such a relationship can also be brought to an end by mutual
agreement between the parties, either in writing or orally.

■ Termination by agreement may also occur if the agency relationship is terminated

pursuant to the provisions of the agency agreement itself. The following situations
may arise in this context:

If the agreement provides for the appointment of the agent for a specified period of time,
the agency will come to an end automatically when that period of time expires.

If the agreement provides for the agency to terminate upon the occurrence of a specified
event, the agency will come to an end upon the happening of the specified event.
 TERMINATION BY ACT OF PARTIES
PERFORMANCE

If an agent is appointed to accomplish a particular task or for a specific purpose, when the task is
accomplished by the agent or the specific purpose is attained, the agency will terminate.

REVOCATION

• The authority of an agent may be revoked at any time by the principal

• Any word or conduct of the principal inconsistent with the continued exercise of authority by the agent may
operate as revocation of the agency
• Revocation of the agent's power by the principal may not automatically discharge the principal from
liability to a third party who is entitled to rely on the apparent authority of the agent on grounds of
representation by the principal or previous course of dealing with the agent before notice of revocation is
given to the third party

• Notice of revocation of an agent's power should be given to the third party as soon as possible.
 RENUNCIATION

• An agent is entitled to renounce his power by refusing to act or by notifying the principal that
he will not act for the principal.
• Unilateral termination of the agency by the agent before he has fulfilled his obligations to the
principal under the agency agreement will render the agent liable to the principal for breach
of the agency agreement, such as payment of damages for loss suffered by the principal.

NOTICE

• If the agency agreement provides that the agency may be terminated upon either party serving on the
other written notice of a specified duration, for example, three months' written notice, either party may
terminate the agency agreement by serving the required notice on the other party

• If the agency agreement does not contain any termination provision, the general rule is that
reasonable notice has to be given to the other party to terminate the agency.
 OPERATION OF LAW

1. Upon the Death of the Principal of the Agent

• The death either the agent or the principal terminated the agency.
• general rule, the agency comes to an end when the principal of the agent dies.
• An agency is terminated by the death of the principal is effective only when the agent has notice of the
principal’s death.
• Section 162 of the Contracts Act Provide that the agent must take all reasonable steps to protect and
preserve the interests entrusted to him when the principle dies or become insane.
Case: Blades v Free and Pool v Pool
An agency which is terminated by the death of the principal is effective only
when the agent has realise about the principle’s death. All the agent
transaction is valid if it is done after the principle’s death if he or she doesn’t
realise about it - Section 161, Contract Act. There is an exception to this
general rule where the agent has an interest in the property which form the
subject matter of the agency. In such a case, when the principle dies, the agent
may maintain to exercise the authority and if the agent dies, the authority will
be passed to the agent’s personal representative
2. When the Principal or Agent Becomes Insane

• The insanity will also terminates the agency as they does not have a capacity to
enter into a valid contract and cannot appointed as an agent or act as one.

• The agency will be terminated by such insanity.

• When the principle becomes insane, the agent is bound to take the responsible
steps to protect and preserve his principle’s interest.

3. The expiry of the fixed period in the contract of agency

• At times contract of agency may get formed for a particular period.

• In such a case after expiry of that agreed period, termination of agency takes place
regardless of whether the business or such transaction has been completed or not.
4. When the principle or agent becomes insolvent or is made a bankrupt
• Upon the insolvency, a person’s rights and liabilities are vested in the Office Assignee
and therefore the agency relationship ceases.
EXPIRY OF THE PERIOD FIXED IN THE CONTRACT OF AGENCY

• If an agency is created for a fixed period, the agency is terminated at the expiry of that period
whether or not the business or transaction has been completed.

FRUSTRATION

• Upon the happening of an event which renders the agency unlawful, the agency may be
terminated.

• An agency contract like any other contract. May be discharged by frustration.

Case: Stevenson v Aktiengesellschaft Fur Cartonnagen Industrie

When an agency is terminated, the A agent cannot bind the principal in transactions
that he may have entered into with third parties. He will be personally liable to third
parties for the contract.
CONCLUSION
• An agency is the relationship that exists between two person when one, called the agent, is
considered in law to represent the other, called the principal, in such way as to be able to affect
the principal’s legal position in respect of strangers to the relationship by the making of the
contracts or the disposition of property.
• The law of agency in Malaysia is mainly found in Part X that is, Section 135 to 191 of the
Contracts Act 1950.
• An agent is defined as ‘a person employed to do any act for another or to represent another in
dealings with third persons’.