MBE Rules · Business Associations
Termination of Authority
Termination of agency authority
The rule
Actual authority ends by agreement, revocation, renunciation, death, or incapacity; lingering apparent authority persists until third parties receive notice — actual notice for prior dealers, publication for others.
In plain English
Termination of authority means that an agent's power to act on behalf of a principal can end in several ways, such as through mutual agreement, revocation by the principal, or the agent's death or incapacity. However, even after actual authority has ended, third parties may still believe the agent has authority until they are properly notified of the termination.
Worked example
An agent, Alex, has been authorized to negotiate contracts for a company. If the company revokes Alex's authority but does not inform previous clients, those clients may still think Alex can act on the company's behalf. If a client enters into a contract with Alex after the revocation, the company may still be bound by that contract until the client receives actual notice of the termination. Therefore, the company is liable for the contract.
Memory hook
Authority fades, but apparent authority lingers until notice is given.
The trap
Exams often present scenarios where authority has been revoked but do not clearly indicate whether notice was given to third parties, leading students to misjudge the agent's power.
How examiners test it
Questions typically involve a situation where an agent's authority is terminated, testing whether the principal is still bound by the agent's actions due to lingering apparent authority.
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