Explain the Ways in Which an Agency Agreement Can Be Formed

Agency agreements refer to a legal contract between two parties, where one party (the principal) hires another party (the agent) to act on their behalf. There are various types of agency agreements, including sales agency agreements, marketing agency agreements, and real estate agency agreements, among others. But how are these agreements formed? In this article, we will explore the ways in which an agency agreement can be formed.

1. Express Agreement

An express agreement is the most common way of forming an agency agreement. It is a written or oral agreement between the principal and the agent that outlines the terms and conditions of their relationship. A written agreement is usually more formal and provides a clear record of the parties` obligations, while an oral agreement is less formal and may be subject to interpretation. An express agreement should include details such as the agent`s duties and responsibilities, the principal`s obligations, the scope of the agreement, and the duration of the agreement.

2. Implied Agreement

An implied agency agreement is one that arises based on the parties` conduct, rather than an express agreement. It typically occurs when the principal behaves in a way that suggests they have authorized the agent to act on their behalf. For example, if a principal allows an agent to use their company`s branding and marketing materials, it can be inferred that the principal has authorized the agent to act as their representative. Unlike an express agreement, an implied agency agreement may be difficult to prove, as the parties` intentions may be unclear.

3. Apparent Authority

Apparent authority refers to a situation where the principal`s conduct leads a third party to believe that the agent has the authority to act on the principal`s behalf, even if no agency agreement exists. In such cases, the principal can be held liable for the agent`s actions, even if they did not intend to authorize those actions. For example, if an agent enters into a contract with a third party on behalf of the principal, and the third party believes the agent has the authority to do so, the principal may be bound by the contract.

4. Ratification

Ratification occurs when the principal agrees to be bound by an agreement made by the agent without prior authorization. This can happen when the principal learns of the agent`s actions but chooses to accept them retroactively. For example, if an agent signs a contract on behalf of the principal without authorization, the principal may later ratify the contract by accepting its terms.

In conclusion, agency agreements can be formed in various ways, including express agreement, implied agreement, apparent authority, and ratification. It is essential to understand the different ways in which an agency agreement can be formed to ensure that the parties` intentions are clear and that the agreement is legally binding.