a) Explain four ways a contract can be terminated.
b) State six duties of an agent to his principal.
Explanation
(a) Ways of terminating a contract:
- By agreement: before any of the two parties perform their part of the contract, they may both agree to terminate it.
- By performance: when each party has performed their part of the contract, it is automatically terminated.
- By breach: a contract is terminated if one party fails to perform its part of the contract.
- By frustration: when the performance of a contract by one party is rendered impossible due to factors beyond its control or no contemplated by the two parties e.g. death, ill-health and government legislation
- By lapse of time: a contract is terminated after the period stipulated for it has ended.
- Bankruptcy: a contract can be terminated when either of the parties is declared bankrupt.
(b) Duties of an Agent to his Principal
- The agent must obey all lawful instructions by his principal.
- He has to exercise reasonable care, skill and diligence in performing his duties.
- He must act in good faith and honesty for the benefit of his principal by not competing with him or divulging his secrets.
- He must act personally and not delegate his duties to someone else.
- He must render account of his stewardship to his principal whenever required.
- He must not make any secret gains or commission beyond what is authorised by his principal.
- He must disclose dealings of conflicting interest with the principal so as to obtain permission to carry them out and obtain commission outside what is paid by the principal.