The relation between a Principle and an Agent is entirely contractual one. But termination of such relationship without the knowledge of the agent may not render the act invalid which has been done after the recession of contract- explain and evaluate th

Introduction: An agreement which is enforceable by law is contract. A contract can be happen between two parties and more than two parties.

According to Wilkins, Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations, along with tort, unjust enrichment and restitution.

Indian Contract Act 1872 is main source of law regulating contracts in the Indian law as subsequently amended.

Make a answer to this question at first we have to know the relation between the principle and agent.

 `Agent’ is a person who is employed to do any legal act for another party or to represent another in dealings with third persons.” Principle is that person for whom such act is done or who is so represented. Like: MetLife Alico appoints Mr. Y to represent their Insurance Company in Bangladesh. Here, MetLife Alico is the principal and Mr. Y is his Agent. The relationship between the two is called Agency.

The relationship of principal and agent is usually created on the basis of mutual consent. It is not necessary that the consent should be formal or expressed in a written document. Normally it is an express agreement even if it is informal.

Power of Attorney is very important element in agency. It is a kind of document which is written and stamped by the principle. An Agent should be appointed by the Principal,. There are three kinds of Power of Attorney:

a)      General: Where an agent given the power to do certain general matters is called general power. Example: managing an estate or a business.

b)       Special: It is a particular power of attorney; appointed by the principle where an agent is authorized to do a specific thing, such as: selling some goods.

c)   Universal: These types of agents are holding broad authority to act on behalf of the principal, example: they may hold a power of attorney or have a professional relationship, say, as lawyer and client.

[12]Works for the Agent:

1. Normally an agent will represent or show off his authority in accordance, he has been followed by the principal’s instructions or message. Directly the principle’s has no control or supervision, the agent is not subject to the principal’s direct observation..

2. An agent is appointed and employed to bring third parties and the principal into a legal and contractual relationship. Here he works as a middle man..

3. An agent should bind the principal to the third parties.

4. An agent gets a certain amount or percentages of commission on the basis of the work he has done.

5. An agent will take the liability for the wrong works which he has done within the scope of his authority.

 6. An agent may be work for many principals at the same time, it depends on him.


Agents are the authority to take the decision and sell goods or can make a deal on behalf of the principle.  Two types of authority:

1. Actual authority: Actual authority can be of two kinds.

a) Express actual authority: Here, we can see that the principal may have expressly conferred authority on the agent

b) Implied actual authority: May be the authority is not express; authority may be implied

2. Apparent authority: Another name of apparent authority is called “ostensible authority”. We can see these types of authority in there where the principal’s words or conduct would lead a reasonable person in the third party’s position to believe that the agent was authorized to act or performance, even though the principal and the purported agent had never discussed about such a relationship.  

Agent has some liability towards third party and as well as towards the principle.

Liability of agent to third party:

 If the agent has actual or apparent authority then the agent will not be liable for acts performed within the scope of such authority. As long as the relationship of the agency and the identity of the principal have been disclosed. When the agency is undisclosed or


partially disclosed, however, both the agent and the principal are liable. There the principal is not bound because the agent has no actual or apparent authority. The purported agent is liable to the third party for breach of the implied warranty of authority.

Liability of agent to principal:

If the agent has acted without actual authority, but the principal is nevertheless bound because the agent had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage.

Agent’s duties towards principle

l. Agent’s main duty is to conduct principal’s business. An agent is bound to conduct the business of his principal according to the principal, he has to follow principle’s direction. He can deal anything even the absence of principle. When the agent deal about something if there is any loss he has to give answer to the principle on the other hand if there is any kind of profit accrues, agent must be rewarded for his work.

2. To his principal on demand an agent is bound to render proper accounts, or he provided in the agreement periodically.

3. In cases of difficulty there is a duty of an agent and that is, to use all reasonable diligence in communicating with the agent’s principal, and he has to follow principle’s instruction.

4. If an agency is terminated by the reason behind it that the principal dying or becoming of unsound mind that time the agent is bound to take all responsibilities on behalf of the [14]representatives of his late principal.

[15]5. The Agent has many duties to fulfill. The agent should give all details information to his principal consciously. He must not delegate his authority. Agent should avoid the clash and problem between his duty and self-interest. Agent should be faithful to the principle.

Rules of creating an agency

1. Agency by Express Agreement: A contract of agency may be created by express agreement. It is no matter that the agreement is either oral or written.

2. Agency by Implied Agreement: Agency agreement can be implied also. Sometimes from the necessity, implied agreement comes toward.


 The authority of an agent’s can be terminated or finished at any time for further reason.  There should be lot of trust between the principle and agent. If the trust has broken down than there is no reason to continue the relation between them. For other reason their relation can be break down:

(a) If the principal or agent is dead

(b) Insanity of the principal or agent

c) Bankrupt of principle or agent.

At first termination of agency affects both the principle and agent, as it brings the actual authority of the agent to an end. Third parties who knew of the agency are entitled to enforce any later contracts made by the former agent against the principal until they are actually or constructively informed that the agency has been terminated.

For any reason if a principal wants to terminate the relationship with the agent then it is important and wise to make this known to the agent. This will avoid the possibility that the former agent continues to bind the principal to contracts with others.


A misrepresentation is that situation where a false statement of fact or law introduces the representee to enter in a contract. Where a statement is make during the course of negotiations which is classed as a representation rather than a term an action for. It may be available for where the statement turns out to be untrue.

There are three types of misrepresentation. These are:

a) Fraudulent misrepresentation: This type of misrepresentation occurs when one makes representation with the intent to deceive and with the knowledge that it is false. Fraudulent misrepresentation allows for a remedy of damages and rescission.

b) Negligent misrepresentation: it occurs at common law when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true. This type of misrepresentation is new and it was introduced to allow damages in situations where neither a collateral contract nor fraud is found.


c) Innocent misrepresentation: An innocent misrepresentation comes where the represent or can be demonstrating to reasonable grounds for the belief for in the truth of the statement.

When a contract is entered into after the misrepresentation of a third party agreement, this area is resembles to the law on undue the influence.

Remedies are available for misrepresentation that dependent on varies types of misrepresentation. For all types the remedy of rescission is available. This situation is giving the parties as same position which they had back in their pre-contractual position. Every party gives back their benefit which they have received under the contract. By the way, it is not always possible that to rescind the contract and in some circumstances the right to rescind may be unseen or lost.


In contract law, recession has been defined as the unmaking of a contract between parties. According to M. Johnson “Recession is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract” It means the setting aside the contract.

We can see the recession is available there, where the misrepresentation is fraudulent, negligent or innocent. The effect of recession may be to terminate the contract.

The first possible remedy for misrepresentation is may be the misrepresentee entitled to rescind contract. It means that, the contract is “taken back”, as like that the contract had never come into existence. At this time the man who is misrepresentee may be entitled to compensation to put him at the back place in that position as there where the contract had not taken place. Actually, recession is distinct from termination of a contract; on the other hand a breach of contract is a term which cancels the future performance. Breach of contract extinguishes the contract prospectively. For recession, the claimant may have a restitution remedy to recover any kind of enrichment that a defendant has received under the contract. In principle the rescission remedy is available for fraud and negligence misrepresentation as right.

When a contract is entered into after the misrepresentation of a third party, this area resembles the law on undue influence

Bars to rescission

The right of rescission may occur in four circumstances expire. Rescission is something about a drastic solution, it is the situation like as just as the right to make terminate for a contractual relation or “condition” which may be seen an oppressive right when exercised.


It is another kind of bars to recession. It occurs when a claimant’s conduct gradually affirmed the contract instead of some important misrepresentation. If the representee of the contract makes an act or action to adopt the contract, or demonstrate a willingness to continue with the contract. When they aware about the misrepresentation then will lose the right to rescind:


Counter restitution impossible

It is one kind of technical sounding name; it is the most important bar to recession in  the practice of law. The meaning of “Counter restitution” is “putting the parties back to their previous position” or to give their positions as before as the contract was created.

Third party rights

A clear bar to rescission is that situation where the unwinding of a contractual exchange may cause injustice to an innocent third party. This will particularly be the case where an item has changed hands and then been sold on to a third person

Lapse of time

The last and fourth potential bar to rescission is the right will be lost if a claimant takes too extending to bring an action or case in the court. The old name of lapse is “laches”.  The time will decided by the judge. A judge will decide that on a case by case the basis according to what he thinks is fair.

Communication of rescission

In the time to rescind a contract, it is absolute to communicate with the intention to rescind to the misrepresentor. Although, it is not necessary, so as long as a misrepresentee unequivocally communicates their wish to no longer to be bound with someone else. If any misrepresentation discovers by the representee and he fails to take perfect and reasonable steps to avoid the contract then he may has not right to be able to rescind it. The time limit for taking such steps varies depending on the type

of misrepresentation. In cases of fraudulent misrepresentation, the time limit runs until when the misrepresentation ought to have been discovered, whereas in innocent misrepresentation, the right to rescission may lapse even before the representee can reasonably be expected to know about it.[

 “Rescission is an equitable remedy and is discretionary. A court may decline to rescind a contract if one party has affirmed the contract by his action or a third party has acquired some rights or there has been substantial performance in implementing the contract.”-by Wilkins.

Laws has some fixed rules and regulation to govern agency relationships which is based on both contract and employment law. If an agency relationship with the principle is wrongfully or forcefully terminated, one party can sue the other for some reason. Such as

Breach of contact: Now a day we can see that many agency relationships are created by the law of contract. Termination of a agency relationship by wrongfully is a breach of the contract.

Employment law: Basically, an agent is the employee of the principal. That agent who terminated by the principle wrongfully can bring a claim against the principal which is not unavoidable.[18]

Sometimes termination of an agency relationship may be much difficult. Although, both contract and employment laws are involved and clear in agency law thus an experienced attorney can advise someone on the best way how to terminate an agency relationship to avoid any complex..


A legally recognized or established agent has some legal obligations or rights towards their principal, which impose a high level of faith or trust and responsibility on the agent. In legal terms this is called a ‘fiduciary relationship’ and this places certain obligations on the agent regardless of any contractual obligations that may be imposed on them.

Agency relation can be terminated by the act of both parties in many ways. Like:

(a) If an agent is employed for any kind of particular or fixed transaction, such as sale of a house, sale of certain lands, sale of some dresses etc, the principle can terminate the relation with the agent on the basis of that the transaction is completed. In the same way,  an agency which is  for a fixed period of time  ends with the expiry of the period in a contract.

(b) Both parties may give notice to one other or they may mutually make an agreement to terminate their agency relationship.

If it is a duty for an agent to represent the principle in front of third party and fulfill all his requirements in such a way a principle should be faithful and loyal towards his agent. The principle can not terminate their relation without the knowledge of an agent.  [19]

The principle can not terminate their relation without the knowledge of an agent.

Thus, we can say that according to Law of contract, 1872 if the agent is unaware of that the principle break relation with him then he has no fault and he can makes any contract with third party. Because he was unknown to the real fact. Recession is giving back the principle’s and agent’s position when they are in a contract. These types of recession are seen in real estate business. If any principle dismiss his relation with agent and if he sales any land or apartment to a third party on behalf of the principle then it is his duty to fulfill the agreement.


 1. Merchant v. Foreman, 182 Kan. 550, 555 (Kan. 1958)

 2.  Tabor v. Mason Dixon Lines, Inc., 196 Tenn. 198 (Tenn. 1953)

 3. Cineol International Corp. v. Hudson Photographic Industries, 13 N.Y.2d 249, 252 (N.Y. 1963)

 4.  Beau car v. Bristol Federal SUV. & Loan Assoc., 6 Conn. Cir. Ct. 148, 159 (Conn. Cir. Ct. 1969)

 5.  Hotchkiss v. Nelson R. Thomas Agency, Inc., 96 Cal. App. 2d 154, 158 (Cal. App. 1950)

 6.  Ritchie v. John Hancock Mutt. Life Ins. Co., 174 S.W.2d 87 (Tex. Civ. App. 1943)

7.  Presser v. Dudley, 153 Cal. App. 2d 120, 124 (Cal. App. 2d Dist. 1957)

 8.  Wilson Sullivan Co. v. International Paper Makers Realty Corp., 307 N.Y. 20, 26 (N.Y. 1954)

 9.  Carlene Coal Sales, Inc. v. Ramsay Coal Co., 129 Colo. 393, 398 (Colo. 1954)

 10. Brinkmen’s Good Time Co. v. J.W. Brown & Assocs., 203 Mont. 427 (Mont. 1983)

 11.  Van Houston v. Trust Co. of Chicago, 413 Ill. 310 (Ill. 1952)

 12.  Morton Marks & Sons, Inc. v. Hill-Chase Steel Co., 196 Va. 268 (Va. 1954)

 13. Phoenix Title & Trust Co. v. Grimes, 101 Ariz. 182 (Ariz. 1966)

 14. Abdullah, Inc. v. Martin, 242 Minn. 416, 420, 65 N.W.2d 641, 644 (1954).

15.  G. Keating (July 7, 2008). “Mortgage Rescission Could Be Class Action Nightmare for U.S. Banks”. Insurance Journal.

16. Ferrara D. (2007). Directors and Officers: Side A Only Coverage Working Through the Hype. FDCC QUARTERLY Summer 2007.


18.  Pete Due Pont (April 26, 2006). “Dog the Swag; How Republicans can break the spending habit.”. Wall Street Journal. Retrieved 2009-06-18.

19. Harrington SE. The Health Insurance Reform Debate. Journal of Risk and Insurance.

20. L. Groin (June 17, 2009). “Blue Cross praised employees who dropped sick policyholders, lawmaker says”. Los Angeles Times.

21. HealthCare.Gov Website Timeline “What’s Changing and When”

22. Committee on Energy and Commerce. (2009). Supplemental Information Regarding the Individual Health Insurance Market. U.S. House of Representatives. See also Case studies: examples of health insurance companies rescinding individual policies

23. Von Hirsch, A. and Roberts, J. (2004) ‘The company law Act 2003 Relating to Sentencing Purposes and the Role of Previous Convictions’

24.  See Basset v Wilkinson [1927] AC 177.

25.  Gesso Petroleum Co Ltd v Maroon [1976] 2 Lloyd’s Rep 305.

26. Misrepresentation Act 1967 s1(a): “Where a person has entered into a contract after a misrepresentation has been made to him, and the misrepresentation has become a term of the contract, then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to butt the provisions of this Act”

27. with v O’Flanagan [1936] Ch. 575, 584.

28. Davies v. London & Provincial Marine Insurance Co (1878) 8 Ch. D. 469, 474. Justice Fry commented on the responsibilities of a fiduciary”…they can only contract after the most ample disclosure of everything…”

29. Brownie v Campbell (1880) 5 App CAS 925, 954.

30. Basset v Wilkinson [1927] AC 177.

31. Smith v Land & House Property Corp (1884) 28 Ch. D. 7.

32. Gesso Petroleum v Maroon [1976] QB 801.

33.  Edging ton v Fitzmaurice (1885) 29 Ch. D. 459, 479.

34. Beattie v Lord Rebury (1872) LR 7 Ch App 777, 803.

35. David Securities Pty Ltd v. Commonwealth Bank of Australia (1992) 175 CLR 353. While dealing with a mistake of law, similar reasoning should apply to a misrepresentation of law.

36. Andre & CIE v Est. Michel Blanc & Fills [1979] 2 Lloyds LR 427, 430.

37. Commercial Banking Co (Sydney) Ltd v R H Brown & Co (1972) 126 CLR 337.

38. Derry v Peek (1889) 14 App. CAS. 337.

39. Due to the ‘fiction of fraud, see Günter Tritely, G.H & Atria, P.S ‘Misrepresentations Act 1967’ (1967) 30 MLR 369

40.  Applicable for statutory misrepresentation but not fraudulent per Lord Hoffman, Standard Chartered Bank v. Pakistan National Shipping Corp (No 2) [2003] 1 AC 959, Para 17 and 18, respectively, at 967

[12] [12]1. Balmain New Ferry Company Ltd v. Robertson (1906) 4 CLR 379

2. Fry v. Barnes (1953) 2 D.L.R. 817 (B.C.S.C)

3. Hillas and Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503

4. Whitlock v. Brew (1968) 118 CLR 445

5. Three Rivers Trading Co., Ltd. v. Gainer & District Farmers, Ltd. (1967) 111 Sol. J. 831

6. Martin, E [ed] & Law, J [ed], Oxford Dictionary of Law, ed6 (2006, London: UP).

7. Jamie Wodetzki, “Boilerplate that Bites: The Arbitration Clause”, 2006

8. Tina L. Stark, Negotiating and Drafting Contract Boilerplate, (ALM Publishing 2003, pp.5-7). ISBN 978-1-58852-105-7

[13]Hans Weber, Pacta Sent Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.;

Principle of Sanctity of contracts

2008 Merriam-Webster online dictionary

(1870-71) LR 6 QB 597

R. Austen-Baker, ‘Gilmore and the Strange Case of the Failure of Contract to Die After All’ (2002) 18 Journal of Contract Law 1

Ewan McKendrick, Contract Law – Text, Cases and Materials (2005) Oxford University Press ISBN 0-19-927480-0

P.S. Atiyah, The Rise and Fall of Freedom of Contract (1979) Clarendon Press ISBN 0-19-825342-7

[14] Termination of law by George Steiner. An examination of the legacy of the myth and its treatment in Western.[7]

George’s Claim: relationship Between principle and agent by Judith Butler. the work of George Wilhelm Friedrich Hegel, Luce Irizarry and Jacques Lacing.[2

[15] Heinemann, Heinrich (1868) (in German). Berlin: Adolph Enslin. ISBN 978-1160289696. OCLC 601932362. 24 Even agent want to terminate the contract cautions should be presented to the court at the same time as previous convictions, but ‘care must be taken to present cautions separately so that the distinction between principle and agent is clear’ (Home Office, 1985).

25 Shapland, 1981 Cr.App.R. (S.) 245

26 Home Office, 1973

Jab, R. C. (1890).The law of termination by Cambridge: CUP Archive.

^ Breech, Beetroot (1948) (in German). lawmodell 1948. Berlin: Gebrüder Weiss Verlag. ^ Steiner, George (October 1996). Western art of law. New Haven: Yale University Press.


[16] Contract law, opera by Carl Off (1895–1982)

A thesis on law by Jean Anouilh (1910–1987) 25 Shapland, 1981 Cr.App.R. (S.) 245

26 Home Office, 1973

“Principle of law”, for soprano and piano (text by Bertolt Breech), by Frederic Rzewski (b. 1938)See Wilkins, by Mikes Theodora is (b. 1925) Contract law, opera by Carl breach(1895–1982)

A thesis on law by Jean Anouilh (1910–1987)

Business law or commercial law by Sen and Mitra

1 1985) 3 Cr.App.R. (S.) 245

(1984) 1CR APP R 19924 Even agent want to terminate the contract cautions should be presented to the court at the same time as previous convictions, but ‘care must be taken to present cautions separately so that the distinction between principle and agent is clear’ (Home Office, 1985).

A Practice Direction requires the remedies of contract provide courts with details of ‘the circumstances of the last three similar convictions, and/or of convictions likely to be of interest to the court, the latter being judged on a case by case basis’. The drift of this Practice Direction and of the Magistrates’ Association guidelines is therefore towards convictions relevant to this termination.

21 (1982) 3 All ER 659 Introduction to breach of law, by Tomas Traetta, libretto by Marco Coltellini (2000)

Business law, by Josef Myslive?ek, libretto by Gaetano Roccaforte (1872)

Commercial law by Jean Cocteau (1889–1963)

Söderbäck, Fanny, ed. Feminist Readings of remedies of law. New York: SUNY Press, 2010. ISBN 978-1-4384-3278-6. Including classical texts by Judith Butler, Brachia Hettinger, Julia Kristina, Luce Irizarry and Adriana Coverer


 [18]Introduction to Securities Arbitration – an Overview from the online leader in securities law news, information and commentary

New York Civil Procedure Law and Rules § 7501, et seq.

W. Cunning’s Law of Contract (1998) 27th ed. OUP, p.21 William. Wordsworth, given the definition of the relation

George Wilhelm Friedrich Hegel, Luce Irizarry and Jacques Lacan.[

William. miles, given the definition of the relation

p.b shelly by the law of agency

[19] principle agent [1998] Ch. 241; Bristol and West

Building Society v Mathew [1998] Ch 1).

Potshard v. Spires and Pond (1876) 1 QBD 410

Bettino v Gye (1876) 1 QBD 183

As added by the Sale of Goods Act 1994 s4(1).

[1962] 1 All ER 474

Maredelanto Companies Naviera SA v Bergbau-Handel GmbH. The Mikhail’s Angeles [1970] 3 All ER 125.