Which factor can terminate an agency relationship?

The correct answer is the mutual consent of both parties. An agency relationship is established based on a mutual agreement, where both the principal and the agent agree to the terms of the relationship. Therefore, if both parties choose to terminate the arrangement, it is considered a valid and effective way to end the agency relationship. This mutual agreement can be based on various reasons, such as the completion of tasks, changes in business objectives, or a desire to switch agents.

Other factors, such as changes in market conditions, the overall cost of transactions, or external conflicts, do not automatically terminate the agency relationship unless they specifically lead to an agreed-upon decision by both parties to end it. These elements may influence the relationship or the performance of duties but do not, in themselves, end the contractual agreement unless both the principal and the agent concur on that decision.