Read the given passage very carefully and answer the question.
An agency arrangement is a form of general contract. As such, except where the agency is irrevocable, an agency can terminate in the same way as a contract is discharged. Only the act or consent of the parties to the agency or the enforcement of the law may terminate the relationship between the principal and the agent. “In the absence of anything to prove its termination, an agency, when proven to have existed, will be presumed to have continued, unless such a length of time has elapsed as destroys the presumption.” When an entity is dissolved, the obligation of the agent to work on behalf of the principal comes to an end. A government law or instrument may stipulate the timeline for the termination of an entity.
In such a case, if the instrument states in clear and unambiguous terms that after the expiry of the time stated in the instrument, an agency shall terminate without intervention on the part of the principal or administrator, the agency shall, in effect, terminate. If the parties maintain their partnership as principal and agent after the expiry of the duration given in the contract, a substantiated assumption is posed that their relationship is regulated by the original contract and that the contract is extended for a similar term. For example, where the parties entered into a contract for a year and proceeded to behave after one year under the contractual conditions, the court would conclude that the parties genuinely wanted to hold the contract alive for a period of time.
On the other hand, if no reasonable deadline has been set by the parties for the expiration of the contract, the contract is assumed to have been terminated after a reasonable period of time. “The nature of the act specifically authorised, the formality of the authorisation, the likelihood of changes in the purposes of the principal, and other factors shall determine what constitutes a reasonable period of time during which the authority continues.” In comparison, the burden of proving an agency’s termination or revocation lies with the agency.
Question
Lalit enters into a contract whereby Shekhar has to provide Lalit for a given period of time with services, which both parties realize are for use in a particular enterprise owned by Lalit, Lalit sold his enterprise to Raj before the expiry of the contract within Shekhar and Lalit, without paying Shekhar for his services. Here-
In the absence of a specific clause so providing, Lalit cannot escape his obligations but he can sell the enterprise
Lalit is not the owner of the enterprise anymore hence, he is not bound by any obligation as all the obligations are shifted to Raj
Lalit cannot sell his enterprise till the contract between him and Shekhar expires.
Lalit can sell the enterprise and even escape the obligation
An agency may be revoked at the will of the principal when an agency is not coupled with an interest, and no third party’s rights are involved. The party terminating the agency must show good cause. The Principal cannot escape the obligation but he is empowered to do whatever he desires to do with his business.