As an agency agreement is a legal contract between two parties, terminating it must be done in accordance with the terms of the agreement or by operation of law. While there are many reasons why an agency agreement may be terminated, some circumstances may automatically result in its termination.
Here are some of the situations that may lead to the automatic termination of an agency agreement by operation of law:
1. Bankruptcy:
If the agency or the principal declares bankruptcy, it may lead to the termination of the agency agreement by operation of law. This is because bankruptcy affects the ability of the parties to fulfill their obligations under the contract.
2. Death or incapacitation of the principal:
If the principal passes away or becomes incapacitated, it may lead to the automatic termination of the agency agreement by operation of law. This is because the agent`s authority to act on behalf of the principal is no longer valid without the principal`s ability to grant such authority.
3. Change of law:
If a change in the law renders the performance of the agency agreement illegal, it may result in the automatic termination of the contract by operation of law.
4. Expiration of the agency agreement:
If the agency agreement contains a specific time period for which it is valid, then the contract will terminate automatically at the end of that period. In such cases, the parties may choose to renew the agreement or enter into a new one.
5. Mutual agreement:
If both parties mutually agree to terminate the agency agreement, it may lead to the automatic termination of the contract by operation of law. However, it is important to ensure that the termination is done in accordance with the terms of the agreement.
It is worth noting that termination by operation of law does not necessarily mean that the parties have fulfilled all their obligations under the agreement. In some cases, termination may result in the need for the parties to fulfill certain obligations before the contract is fully terminated.
In conclusion, while there are many reasons why an agency agreement may be terminated, some circumstances may automatically result in its termination by operation of law. As with any legal contract, it is important to understand the terms of the agreement and the circumstances that may lead to its termination.