LEGAL VIEWPOINT: Termination of Agency by Dr AldelGadir Warsama Ghalib, Legal Counsel, Bahrain

Dr AbdelGadir Warsama Ghalib, Legal Counsel, Bahrain

Agency relationship is based on a contract between the principal and the agent. This legal contractual relationship in many instances could start due to certain relation between the two parties. The agency contract covers all details regarding the agency including the duties of the principal and the agent, the remuneration, scope and specific tenure, if any.

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The agency contract, also, includes necessary details regarding termination of the agency. A well drafted agency contract usually will include when and how the agency is to come to an end. The relationship then will terminate at the time or on happening of an event stated in the contract. If no time or event is specified, then the agency automatically ends when the result for which the agency was created has been accomplished. Of course, both parties may mutually agree to modify their agency contract and accelerate or extend the termination date.

However, it would be important to mention that, notwithstanding the agency contract, either party may terminate the agency at any time since the relationship is based on mutual consent. This gives each party, the power to terminate even if there is no contractual right to do so. For example, suppose the agency contract provides that the agency will continue for five years. Despite this, either party can end it before that. This is based on the doctrine of “agency at will”. However, whenever one party exercises the power to terminate in violation of the right to terminate, the other party may recover monetary damages based on a civil suit for breach of agency contract.

There are some exceptions to the rule that one possesses the power to terminate the agency at any time. This happens mainly when, the agency is coupled with an interest and whenever there are certain legal restrictions. When an agency is coupled with an interest, this gives an exception to the rule that each party may terminate. This type of agency is irrevocable without the clear consent of the agent. With reference to legislative restrictions, in some countries, the termination is not allowed when based on race, color, sex, religion, age, labor union activities and others.

The right of each party to terminate is there, however, make sure that such right may not be fully free, due to the nature of the agency or legal restrictions.