Law of Agency: Terminating Authority

Termination of Actual Authority

Unless the agent's authority is irrevocable (see below), then their authority may be terminated in the following ways.

1) Termination According the Contract's Terms

If the agent'f authority is conferred for a particular task then accomplishing that task terminates their authority. Sometimes termination occurs by the circumstances of the market the agent operates in, due to custom: Dickenson v Lilwall. Once authority has terminated by completing the contract the agent has no authority to subsequently vary the terms of the (sale) contract: Blackburn v Scholes. 

If the agent doesn't succeed then their authority will expire on either a conferred period of time, or a reasonable time. What is reasonable may be longer when a) the agreement contains a restraint of trade clause (Decro-Wall v Practitioners) b) the contract predictably accounts for a very high proportion of the agent's business c) the agreement involves considerable initial investment of time and effort by the agent but no real rewards until later.

In some instances however, an agency can be terminated at will by its transient nature, which doesn't call a for dedicated initial investment. Two examples are estate agents and solicitors: Luxor (Eastbourne) v Cooper and Court v Berlin. 

A case where the Court of Appeal refused to give an extended notice period was in Alpha Lettings v Neptune Research because a) longer notice periods are more consistent with formal agreements, which tend to address this issue 2) The agent was free to represent competitors 3) The agency only constituted 1/5th of the agent's turnover 4) Generally the length of the agency and their regular expenses aren't relevant factors in determining the notice period. Only the initial investment and incurring of expenditure for legitimate future return are relevant. 5) An otherwise unreasonable termination will not extend the notice period if it is consistent with the contract.

2) Discharge of the Agency Contract

Authority is immediately terminated if the contract is frustrated: Sovfracht v Van Udens - war created illegality in this case. Also if either party causes a repudiatory breach which the other accepts. Termination occurs if and when it is accepted.

3) Revocation

In agency law the unilateral withdrawal of authority by the principal is always effective regardless of the contract's terms, and is immediately effective upon notice to the agent. It may be an unlawful repudiatory breach, but it still effective to terminate the relationship. The principal retains this power, even if they have no right to do so e.g. Warlow v Harrison. 

4) Demise or Incapacity of the Principal

Demise of the principal, whether by death (natural person) or insolvency (a company), instantly terminates the agent's authority: Lodgepower v Taylor. The same goes for loss of mental capacity - maintaining agency for an insane person is addressed via legislation - under the Mental Health Act 2005 a principal can create a 'lasting power of attorney' giving power to the donee continuing authority to take decisions on the principal's behalf once they succumb to insanity.

In each of these instances actual authority terminates irrespective of whether the agent is aware of the terminating event or not. Any subsequent act of the agent, even if genuinely honest and reasonable, renders the agent liable for breach of warranty of authority (to the third party) and give no entitlement to remuneration.

Irrevocable Actual Authority

This is notably different to agency in general, as it benefits the agent. Hence, the fiduciary relationship doesn't apply here.

Must be either a) conferred by deed (/power of attorney), or b) the authority exists to secure an interest of the agent existing independently of the agency. For example, the principal owes the agent money and he can't pay him back. So, he grants the agent authority to generate money on his behalf, and the agent is repaid with the proceeds: Gaussen v Morton. This doesn't extend to the agent simply gaining through the exercise of authority, the interest must be independent of the agency: Temple Legal Protection v QBE. The grant of authority must be intended to benefit an interest of the agent. Factual coincidence of the authority and the interest is insufficient: Schindler v Brie. 
It doesn't matter if the contract describes (or doesn't describe) it as 'irrevocable' - this is irrelevant.

Irrevocable authority exceptionally survives any attempted unilateral revocation by the principal. Under a power of attorney, authority also survives death or mental incapacity. It's unclear whether this is the case with the common law, but it is generally assumed to have the same result.

Continuation of Apparent Authority After Termination of Actual Authority

Apparent authority survives the termination of the agent's actual authority. The result is that the principal may be bound by the agent's acts unless they give notice of termination to third parties. For example, where a company decided to limit their agent's authority from a general authority to a specific authority requiring permission for each transaction, they were bound even when the agent didn't seek it: Rockland Industries v Amerada Minerals. The revocation of authority may rest on the agent's position rather than their actual status: SED Trygg v Manches. This also applies to cases of incapacity by insanity (and thus presumably death as well): Drew v Nunn - this decision is motivated by a desire to protect third parties.

Financial Consequences of Termination of Authority (1): At Common Law

Where the principal unlawfully revokes the agent's authority they are entitled to damages for breach of contract, aka the loss caused by the breach: Bell Electric v Aweco Appliance. Agency contracts, due to the nature of agency relationship,  are not specifically enforceable. Due to the this however, we also have to ask - what is the agent entitled to? A right to remuneration? The nature of agency is that they have opportunities to earn remuneration, but no contractual rights. With respect to the duration of the contract, the agent is entitled to compensation based on the shortest period for which the principal was legally obliged to engage him.

(2) Terminating Commercial Agency (see next post)