An agency relationship, governed by the Indian Contract Act, 1872, is founded on the principle that an agent acts on behalf of a principal. The principal generally has the power to revoke the agent's authority. However, this power is not absolute and is subject to certain rules designed to protect the agent's legitimate interests and prevent undue hardship or injustice.

Here are the key rules governing the revocation of an agent's authority, examined in the context of agent protection:

1. General Rule of Revocation (Section 203): The principal can generally revoke the agent's authority at any time before the authority has been exercised so as to bind the principal. This reflects the consensual nature of the agency. However, this general power is curtailed by specific protections for the agent.

2. Agency Coupled with Interest (Section 202): This is a crucial protection for the agent. If the agent has an interest in the subject-matter of the agency, the authority cannot, in the absence of an express contract, be terminated to the prejudice of such interest. For example, if an agent is appointed to sell goods and is also given a lien over those goods for a debt owed by the principal, the principal cannot revoke the authority to sell until the debt is repaid. This rule prevents the principal from unilaterally depriving the agent of a vested right or security.

3. Revocation after Partial Exercise of Authority (Section 204): The principal cannot revoke the authority given to an agent after the authority has been partly exercised so far as regards such acts and obligations as arise from acts already done in the agency. For instance, if an agent is authorized to buy 100 bags of wheat and has already bought 50, the principal cannot revoke the authority for the 50 bags already purchased, as the agent has incurred obligations. This protects the agent from liability for acts already performed in good faith under the principal's instruction.

4. Compensation for Revocation (Section 205): If there is an express or implied contract that the agency should continue for a fixed period, the principal must make compensation to the agent for any previous revocation of the authority without sufficient cause. This rule safeguards the agent's expectation of earning commission or remuneration for the agreed term, ensuring that arbitrary termination does not leave the agent uncompensated for their efforts or lost opportunities.

5. Notice of Revocation (Section 206): Reasonable notice must be given of such revocation or renunciation; otherwise, the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other. This ensures that the agent has adequate time to adjust to the termination, settle outstanding matters, and avoid incurring further liabilities on behalf of the principal. It also protects third parties who might continue to deal with the agent without knowledge of the revocation.

6. Effect of Revocation on Third Parties (Section 208): The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them. This means that acts done by the agent before receiving notice of revocation, or acts done with third parties who are unaware of the revocation, can still bind the principal. This protects the agent from being held personally liable for acts done in good faith and also protects innocent third parties.

In summary, while the principal retains the power to revoke an agent's authority, the Indian Contract Act incorporates several provisions to ensure that this power is exercised fairly. These rules protect the agent's financial interests, prevent arbitrary termination, ensure compensation for wrongful revocation, and safeguard the agent from liabilities arising from acts done without knowledge of termination, thereby balancing the principal's right to control with the agent's right to fair treatment.