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Agency • Termination of Principal-Agent Relationship
AG#020
Legal Definition
An agent's actual authority may terminate by: (1) lapse of time, (2) the occurrence of a specific event, (3) a change in circumstances, (4) a breach of a fiduciary duty, (5) a unilateral act, or (6) by operation of law.
Plain English Explanation
There are various ways an employee may lose their authority:
(1) Their agreed upon period of authority expires (e.g., "You can do that for 6 months.").
(2) Some specific, agreed upon event occurs (e.g., "You are my Chief of Staff for as long as I am in the White House.")
(3) A drastic change in circumstances that would make an agent aware they no longer have their authority (e.g., if Bob sells fancy glass vases, but an earthquake causes their entire warehouse of vases to be destroyed, it should be obvious to Bob that he no longer has the authority to sell vases for the company since they no longer have any to sell).
(4) A fiduciary duty is a legal or ethical duty owed to someone. If an agent breaches their fiduciary duties to their principal, their authority terminates.
(5) A unilateral act, such as "You're fired," or "I quit." Ultimately, no principal can force an agent to remain their agent, and no agent can force their principal to remain their principal. This doesn't mean that unilaterally destroying the relationship won't result in damages (i.e., if there is an employment contract, but the employee leaves early).
(6) Sometimes the law can step in and interfere with agency relationships. For example, if a principal goes insane or dies, the law may step in and dismiss their agents and relieve them of their authority to act on behalf of the now-incapacitated principal.
(1) Their agreed upon period of authority expires (e.g., "You can do that for 6 months.").
(2) Some specific, agreed upon event occurs (e.g., "You are my Chief of Staff for as long as I am in the White House.")
(3) A drastic change in circumstances that would make an agent aware they no longer have their authority (e.g., if Bob sells fancy glass vases, but an earthquake causes their entire warehouse of vases to be destroyed, it should be obvious to Bob that he no longer has the authority to sell vases for the company since they no longer have any to sell).
(4) A fiduciary duty is a legal or ethical duty owed to someone. If an agent breaches their fiduciary duties to their principal, their authority terminates.
(5) A unilateral act, such as "You're fired," or "I quit." Ultimately, no principal can force an agent to remain their agent, and no agent can force their principal to remain their principal. This doesn't mean that unilaterally destroying the relationship won't result in damages (i.e., if there is an employment contract, but the employee leaves early).
(6) Sometimes the law can step in and interfere with agency relationships. For example, if a principal goes insane or dies, the law may step in and dismiss their agents and relieve them of their authority to act on behalf of the now-incapacitated principal.
