Agency by agreement is a legal concept that refers to a relationship between two parties where one party, the principal, authorizes another party, the agent, to act on their behalf. This concept is commonly used in business transactions and is governed by agency law.
In an agency by agreement relationship, the principal gives the agent the authority to make decisions and take actions on their behalf. This can include negotiating contracts, purchasing goods and services, and making payments. The agent is expected to act in the best interests of the principal and follow their instructions.
It is important to note that agency by agreement can be established through both written and verbal agreements. However, written agreements are generally preferred as they provide a clear record of the terms and conditions of the relationship.
There are three essential components required for agency by agreement to exist. These are:
1. Consent: The principal must give their consent to authorize the agent to act on their behalf. This can be given in writing or verbally.
2. Control: The principal must have the ability to control the actions of the agent. This means that the principal has the right to give the agent instructions and the agent is obliged to follow them.
3. Fiduciary duty: The agent is obligated to act in good faith and in the best interests of the principal. This means that the agent cannot act in their own interests or take advantage of the principal.
Agency by agreement can be terminated in a number of ways, including when the principal withdraws their consent, when the agent breaches their fiduciary duty, or when the purpose of the agency relationship has been fulfilled.
In conclusion, agency by agreement is a legal concept that allows a principal to authorize an agent to act on their behalf. This relationship is governed by agency law and requires the consent of the principal, the ability of the principal to control the actions of the agent, and the fiduciary duty of the agent to act in the best interests of the principal. It is important for both parties to understand their roles and responsibilities in this relationship to ensure that it is effective and beneficial for all parties involved.