Agency Relationship

Agency Relationship

Part A

In the legal context, an agency is a consensual relationship between two parties which is made binding by a contract. As per the terms and conditions of the contract, the principal party grants the right and authority to the agent to deal with a third party. Therefore, the agent has a legal authorization for acting on the principal party's behalf. In nature, the relationship of an agency is fiduciary, meaning that the words and actions that the agent and the third party share between themserve as a binding contract (Connolly, 1998).

An agency relationship arises established with the mutual and unequivocal consent and approval of both the involved parties, i.e. principal and agent. Therefore, a party cannot unwittingly claim to be an agent for a principal without his consent and vice versa. Moreover, even though a principal-agent association is established through a contractual agreement between the two involved parties, a contract may not be required if it is understood and obvious that the parties have the intention to act as agent and principal (Mechem, 1914).

According to the law, the agreement which establishes an agency relationship can either be implied or express, whereas the principal and the agent can either be an entity (partnership or corporation) or an individual (Connolly, 1998). The laws of agency comprehensively define the legal standing of an agency along with its role and limitations of authority. For instance, it grants one party the right to employ a second party in order to perform a range of tasks, also possibly restricting him from carrying out certain functions.

One of the most essential points of focus in the wider agent-principal relationship is the concept of control. Under the binding contract, the agent accepts the responsibility of acting under the principal's directives and control. The agent may either be ...