An Agency relationship is:
The fiduciary relationship(Fiduciary Duty: A duty arising from the trust and confidence) where one person shall act on the behalf and is subject to his control; and consent of the other to act.
It may be a business or personal relationship.
Simply stated, the agent acts for the principal as if it were the principal acting-and with the same authority- as if it were the principal.
Usually results in the following relationships:
a. Principal and agent
b. Employer (master) and employee (servant)
c. Principal and Independent contractor
Definitions (some not in the text at this juncture):
Principal: The person or entity on whose behalf and subject to whose control an agent acts. i.e. the boss at work.
Agent: the person who agrees to act on behalf of and instead of his or her principal, subject to the principal’s control. A good example would be an estate agent.
Generally, in a business relationship, the principal and agent relationship requires being either an employee/employer relationship or an independent contractor.
Fiduciary: A person who undertakes to act on behalf of and primarily for the benefit of another. For example, a trustee for a trust.
Agency by Agreement/Contract: An agency relationship based on an express or implied agreement that the agent will act for the principal. Obviously the most common form. In some cases, there weren’t enough required elements to form a contract, and thus only an ‘agreement.’
Agency by Ratification: A confirmation by the principal of an act or contract performed or entered into on his or her behalf by another, who assumed, without authority, to act as his or her agent. May be oral or written, usually cannot be rescinded, is retroactively applied back to original date the alleged contract was ‘made.’
Agency by Estoppel: If a principal (NOT THE AGENT) holds out to a third party that another is authorized to act on the principal’s behalf, and the third party deals with the other person accordingly, the principal may not later deny that the other was the principal’s agent for purposes of dealing with that third party.
Agency by Necessity(Emergency): When an unforeseen situation demands action to protect or preserve the property and rights of the principal, but the agent is unable to contact the principal, the agent has emergency authority to act on the principal’s behalf.
Express Authority: Authority declared in clear, direct, and definite terms, orally or usually in writing.
●Implied Authority: actual authority that is
(i) Conferred by custom (everyone in the job has always done this), (ii) inferred from the position the agent occupies (you would expect a vice president to be able to act on behalf of the company), or (iii) inferred as being reasonably necessary to carry out express authority (sign the contract).
Apparent Authority: Authority that arises when a principal, by either words or actions,causes a third party to believe that an agent has authority to act, even though the agent has no express or implied authority to act with regard to the particular matter at hand.