When can an agency agreement be validly terminated regarding an agent's incapacity?

An agency agreement can be validly terminated due to the principal's insanity because such a condition directly affects the principal's capacity to make rational decisions and engage in contractual relationships. The law recognizes that if a principal is deemed mentally incompetent, they can no longer effectively oversee or direct the actions of an agent, thus justifying the termination of the agency agreement. This ensures that the interests of both the principal and the agent are protected, as the principal lacks the capacity to fulfill the responsibilities required of them in the relationship.

In contrast, temporary illness of the agent does not typically lead to termination, as it is generally not considered a permanent condition that impairs the agent’s ability to perform their duties. A contract violation would invoke other legal remedies rather than outright termination due to incapacity. Feeling overwhelmed is a personal sentiment and doesn't constitute a legal incapacity relevant to the termination of an agency agreement. Thus, the correct scenario that validates termination in this context relates specifically to the principal's mental state.