1. Dr. Lailoona Jawed
BM-25536

2. Termination of Agency

3. An Agency may be terminated in any of the
following ways.

4. Agreement
Law allows termination when both the
Principal and agent are agreed.
Example:
A employed B and signed a contract of
Agency for 1 year. Agent B and A decided
with mutual understanding to demolish this
contract.
Law allows such termination when both the
Principal and agent are agreed.

5. Revocation By Principal
The Principal reserves the right and can
terminate the contract with Agent any time, but
till that time his liabilities will remain intact and
termination will be considered only for future. In
continuous type of contract the Principal must
have to fulfill all his responsibilities required for
termination by law or written on contract letter.
He has to serve, legal notice should be given to
Agent with or without reason (depends on nature
of business and condition mentioned on contract
of employment.
He (Principal) must have to serve notice as
stated and has to pay dues and other liability on
him.

6. Example:
A was agent of principal B decided to terminate
the agency before time and for this served a
notice one month before. B according to the
agreement also mentioned a genuine reason and
also provided opportunity for compensating any
legal claim of agent on principal. This termination
will be considered as legal.

7. Revocation by Agent
This is the right that under legal frame an Agent can
revoke the contract. But for this he has to follow and
fulfill all the condition set at the time of agreement.
He has to submit an application of resignation to a
considerable period before that actual date of
revocation other wise the Principal reserves the right
of demanding any loss thereby.

8. Example:
If A is an agent and B is principal and A wants
terminates his status as agent with B,
according to the agreement the served the
notice to his principal one month before and
offered him to conduct audit and enquiry for
providing him clearance, after one month the
agent can comfortably resign

9. Completion of Business
Some agencies are engaged for specific task or
a component of actual job. After finishing that
component, business the contract
automatically is terminated. This type is
common in a Project type of work.
Example:
The agency automatically terminates on completion of a
construction of a building , between a builder(agent) and
proprietor(principal).

10. Expiry of Time
Termination of an agency takes place if a contract is
made for predefined fixed period of time. The agency
automatically gets terminated on expiry of that period no
matter the work is been completed or not.
Example:
JAICA international launched a project in Pakistan for
developing HIS ,the project director as a principal made
contract with many agents responsible for doing various
types of activities related to the project. This project was
supposed to be for one year which expires on 31st
December of that year on 1st of January of next the
legality of all the contracts were lost.

11. Death of Principal or Agent
In case of the death of either principal or
agent the contract of agency becomes null
and void at the same moment.
Example: A appointed B as an agent for one year during
the year, A or B who so ever is died the contract will be
terminated for future .

12. Insanity of Principal or Agent
Same as mentioned above instead death if
agent or principal who so ever becomes
insane the contract is terminated for future.
Example: A and B were principal and agent respectively
for one year if wither A or B becomes insane the contract
is terminated

13. Insolvency of Principal
The agency is terminated by the insolvency of
the principal since an agent is more connecting
link with the third parties his insolvency may
not terminates the agency in some cases
Example:
A appoint B as an agent for two years, B becomes insolvent
after six months the agency comes to an end

14. Destruction of Subject Matter
The agency terminates on the destruction of
subject matter of the contract of agency
Example:
B appoints C to sale his car, but the car is ceased on default
of A, agency is terminated automatically.

15. On becoming Alien Enemy
If the principal and agent is in a contract of agency
find themselves in a condition or situation that by
any mean they cannot deal or depend on each other,
reason related to something not under control of
them the agency will be terminated
Example:
Ranjit Singh was agent of Mansha group in Amritsar of India
for looking after the business of export of tomato and onion.
Mean while the conflict at the border made the
transportation impossible so the enmity of the two countries
made the agency almost impossible so it will consider as
terminated.

16. Change of Law
If the law changes and previously under a
contract of agency and the principal the
dealing was going on now it will not be, as the
act which was legal before is not becomes
illegal due to new imposed law.
Example:
Ranjit Singh was agent of Mansha group in Amritsar of India
for looking after the business of export of tomato and onion

17. Rights & Duties Of Principal
& Agent

18. Rights Of Agents:
• Right of retain :
The agent has a right to retain, out of any
sums received all money due to him in respect
of remuneration, advance made, expenses
incurred in conducting business.
• Right to receive remuneration :
It’s a right to receive remuneration if he has
completed his task. He is not entitled to any
remuneration for part transaction.

19. • Right of lien :
He has right to exercise particular lien over
the goods, paper, property until the amount
due to him for commission, expenses has
been paid.
• Right to be indemnified for lawful acts:
An agent has the right to be indemnified
against the consequences of all lawful acts
done by him in exercise of the authority
conferred to him. However he cannot be
indemnified against any unlawful acts done by
him.

20. • Right to be indemnified for acts in good faith:
Where one person employs another to do an
act and the agent does an act in good faith,
the employer is liable to indemnify the agent
against the consequences of that act. Though
it causes an injury to the rights of third
persons.

21. • Right to compensation for injury:
An agent has the right to compensate against
the injuries caused to him due to the
principal’s neglect or want or skill.
• Right of stoppage of goods:
An agent has the right to stop the goods in
transit to the principal like an unpaid seller, if
he has bought the goods with his own money
and the principal become insolvent

22. Duties Of An Agent:
• Duties to follow direction or customs:
The agent is bound to conduct the business of
agency according to the directions of
principal. If the principal does not give any
direction then, he should follow the custom of
trade.
• Duty to work with reasonable skill:
The agent must act with reasonable skill and
diligence. It means that skill can be possessed
by the ordinary men.

23. • Duty to render accounts:
An agent is bound to render proper accounts to
his principal on demand is the duty of an agent to
keep true accounts regarding all the property or
money belonging to his principal he should also
produce them on principal’s demand.
• Duty to communicate:
It is the duty of an agent, in case of difficult, to
use reasonable diligence in communicating with
his principal and in seeking to obtain his
instruction.

24. • Duty on termination of agency:
When an agency terminates due to the death
or insanity of principal, the agent must take
reasonable step for the protection of his legal
interest.
• Duty not to deal on his own account:
If an agent deal on his account during agency
without principal’s permission, the principal
pay reject the transaction. The principal may
claim default caused by agent.

25. • Duty not to make secret profit:
An agent should make any secret profit out of
the agency if the agent earns any secret profit
the principal can recover it from the agent.
The principal may terminate or stop the
commission of agent.
• Duty to pay sum received:
Any amount that an agent received on behalf
of principal, it should be delivered to principal,
he may deduct his remuneration or expenses.

26. • Duty not to delegate authority:
An agent must perform the work of agency
himself ,he must not delegate the authority to
another person. There are few exemptions
which are as follows:
• When the principal has permitted to delegate authority
• When by ordinary custom of trade, a sub agent can be
appointed
• When the nature of agency make this necessary
• When an emergency arises which permits the condition of
subagent

27. Rights Of Principal
• Right to recover damages:
If the principal suffers any loss he has the right to
recover from his agent.
• Right to obtain secret profit:
Principal has the right to recover any secret profit
made by agent without the knowledge of
principal debtor.
• Right to refuse to indemnify agents:
If the principal shows that the agent has acted as
a principal himself and not as agent, he has the
right to refuse to indemnify the agent against the
loss caused to him.

28. Duties Of Principal
• Duty to be indemnify for lawful acts:
it is the duty of principal to compensate an
agent against the damages caused to him by
the consequences of all lawful acts done by
him in exercise of the authority conferred to
him. However he cannot be indemnified
against any unlawful acts done by him.

29. • Duty to indemnify for acts in good faith:
It is the duty of principal to indemnify the
agent does an act in good faith, the employer
is liable to indemnify the agent against the
consequences of that act. Though it causes an
injury to the rights of third persons.

30. • Duty to compensate for injury due to his
neglect:
A principal must compensate against the
injuries caused to agent due to the principal’s
neglect or want.
• Duty to pay remuneration and dues:
It is the duty of principal to pay the agent all of
his dues. Remuneration and commission and all
the expense incurred by him should be
reimbursed in case of authority