What constitutes a termination by operation of law?

Termination by operation of law occurs when certain legal events automatically dissolve the agency relationship without the need for action by either the principal or the agent. This process is typically triggered by significant changes in circumstances that impact the agency. For instance, the death of either the principal or the agent, or the declaration of bankruptcy, are events that legally terminate the agency.

These occurrences fundamentally alter the legal capacity or function of one party involved in the agency, which is why the law stipulates that the agency should come to an end. This is distinct from other forms of termination, such as through mutual agreement, where both parties actively decide to end the relationship, or through misconduct, which involves an action that breaches the terms of the agreement. Similarly, expiration of the contract duration is a planned termination that occurs at the end of a defined period rather than through unforeseen legal events. Thus, legal events like death or bankruptcy specifically align with the concept of termination by operation of law.