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Figure 19.1When adischarged agentcontracts withoutauthority ofthird partyDidagent haveprior dealings withthird party on behalfof principal?YesDidthird partyreceive notice thatagent wasdischarged?NoAgent hasapparentauthority tocontract andbind principalNoYesPrincipal isnot liable oncontractPrincipal isnot liable oncontractPrincipalis liable oncontractAgent’s Objective Becomes IllegalIf, after an agency agreement has been entered, the purpose of theagency is declared illegal, then the agency is terminated by operation oflaw. If only part of the agent’s required activity becomes illegal, onlythat part of the authority ends. The remaining authority to perform legalactivities remains in effect.By Acts of the PartiesMost agency relationships are terminated when the parties have fullycarried out their duties. The parties may also terminate their relationshipby mutual consent before the contract is fully performed. Moreover,certain acts by agents or principals may be enough to terminate arelationship.TERMINATION OF ANAGENCY RELATIONSHIPThis chart indicates howliability is determined aftertermination of an agencyrelationship. Why does thelaw permit a third partyin some cases to hold aprincipal liable even afterthe principal has dischargedan agent?PerformanceIf an agent is appointed to accomplish a certain result, the agencyterminates when the result is achieved. In other words, when the job isdone, the agency ends.Mutual AgreementThe principal and the agent may mutually agree to terminate theagency. Termination may result from the passing of a preset time period.However, the principal and the agent may agree to end the relationshipat any other time, even if the task is left undone or the time period hasnot yet elapsed.Chapter 19: Agency Relationships and Their Termination 425