10.14 Terminating an Agency Relationship

Company policy is to discuss the termination of any agency relationships with the Broker or Manager before doing so orally or in writing.

Agency relationships are terminated in a variety of ways. Here are some examples:

• Performance - The agency relationship terminates when the purpose for which it was created is fulfilled.

• Mutual Agreement - The principal and agent can agree to terminate the agency relationship prior to the terms stipulated or implied in the agreement.

• Death or Incapacity - If either the principal or agent should die or become incapacitated, the agency relationship automatically terminates. This includes termination with the brokerage.

• Expiration - The agency agreement terminates on the expiration date, regardless of whether the purpose that the agency agreement was created has been fulfilled.

• Resignation of Agent - The agent can resign at any time. Since the services contracted for in the agreement are usually personal in nature, the principal cannot sue for specific performance. However, the agent can be liable for breach of contract. As an example, if an agent were to breach a provision of their Independent Contractor Agreement such as revealing trade secrets that were agreed to remain confidential, the agent could be liable.

• Unilateral Discharge - The agency relationship terminates if the principal discharges (fires) the agent prior to the expiration of the agreement. The principal can sometimes be held liable for damages sustained by the agent for expenses incurred to date.

• Change in the Law - If the subject matter of the agency agreement becomes illegal after the agency agreement is created, the agency terminates when the subject matter becomes illegal.

• Material Change in Circumstances - If there is a material change in circumstances affecting the subject matter of the agency agreement that makes the agreement impossible or impractical to perform.

• Bankruptcy - In the case of a bankruptcy, title to property passes by operation of law to a court appointed receiver.

When a principal files bankruptcy, the agency terminates. In some cases, the bankruptcy of the agent can also terminate the agency relationship.